Chrysler LLC’s playbook in an expected bankruptcy that tests a legal strategy for a quick restructuring with heavy government backing, analysts said. GM, which faces a June 1 deadline from the U.S. government to come up with a
By Donna Tunney Sun May 24, 2009, 06:00 AM EDT Tools: Print Comments StumbleUpon Newsvine del.icio.us Digg HARWICH - The downsizing of the auto industry has hit the Cape, but Peter Stagg, owner of Stagg s Cape Cod Auto Mall in East Harwich, says he s not going out of business with or without Chrysler.
Stagg s is among the 12 Chrysler dealerships in Massachusetts notified in the past week that their franchises would be terminated under the automaker s Chapter 11 bankruptcy reorganization. Nearly 800 dealerships, out of 3,200 operating nationwide, were on a termination list in a filing with the U.S. Bankruptcy Court. Chrysler said the targeted franchises would be terminated by June 9. They re trying to use the bankruptcy laws to beat us out of business to not renew our franchise, said Stagg, whose dealership is on Route 137, just north of Route 39. He said the dealers aren t going down without a fight. The Chrysler New Car Dealers Association has hired an international law firm to fight the closings, and representatives are meeting with the Obama administration s car task force to [leverage] support for preventing the bankruptcy court from cutting us off, said Stagg.
The Chatham resident and longtime Rotary member has owned the East Harwich Chrysler dealership for 29 years; before that he sold cars in Chatham. Stagg owns all the cars on his lot. As soon as a car I ordered comes off the factory [line], it s mine, it s paid for, even before it s loaded onto the [delivery] truck, said Stagg, who had been getting financing through Sovereign Bank.
But now, the banks won t loan me and hundreds of others the money to buy new inventory. The dealers have been to all the banks no one is lending to us. They re not going to lend money to buy cars from a manufacturer that s going into bankruptcy. Even so, Stagg is upbeat about his prospects. In a worst-case scenario if his franchise is terminated I ll sell used cars, I don t need Chrysler to stay in business, he said. In fact, if he loses his franchise, Stagg said his expenses would decrease. Every [new car] brochure that s handed out here, I paid Chrysler for. We pay Chrysler $760 a month to use its computer system to order cars and transact business. They charge us for every special tool that they determine we need to fix the cars. They charge a monthly fee for their software that diagnoses what s wrong with a car, said Stagg. While Stagg is confident he ll weather the storm, he said the economy has prompted changes in his business. We used to have 30 employees. Now we re down to 10, and I am back to working six days a week. But I don t mind. We have loyal customers, and we have a great service center, and I think I m the only South Shore dealer maybe the only dealer in the state who still lists his personal phone number in the phone book.
Italian Technology Is Chrysler Category : Ferrari Digest Discuss This time around, the Italian automaker is hoping to make a more favorable and lasting impression on American consumers, with much-improved, fuel-efficient cars that could roll off the assembly lines of its new partner, , in as little as 18 months.
It is a remarkable turnabout for Fiat, which has ridden a wild roller coaster of successes and failures throughout its history, just as its new partner, Chrysler, has.
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WASHINGTON - Auto lender GMAC Financial Services will receive $7.5 billion in additional government aid to keep loans flowing to would-be buyers of GM and Chrysler vehicles and shore up its capital postion marking the second time the government has stepped in to prop up the lender.
To help GMAC raise additional funds, the Federal Deposit Insurance Corp. took the rare step Thursday of allowing the junk-rated company to gain access to its debt guarantee program. GMAC will be allowed to issue as much as $7.4 billion in debt, guaranteed by the FDIC in case the company defaults on payment. In addition, the Federal Reserve waived rules to give GMAC’s new bank, called Ally Bank, more leeway to make loans to GM customers. Analysts suggest that the new government support will make GMAC a lending powerhouse that will give GM and Chrysler a huge advantage over their competitors including U.S. rival Ford Motor Co., which hasn’t taken any government aid. It would have the power to offer better loan terms to buyers of GM and Chrysler cars and trucks as a way of steering business to those automakers. GMAC received $5 billion in December from the Treasury Department’s $700 billion financial bailout program in exchange for 5 million common shares and the promise to extend financing to dealers of Chrysler LLC, which is restructuring under Chapter 11 bankruptcy protection.
After failing the government’s bank stress test, the Treasury Department mandated earlier this month that GMAC raise $11.5 billion in additional capital, including $9.1 billion of new Tier 1 capital. But GMAC, which reported a first-quarter loss of $675 million, has seen rising defaults in its auto finance division. That, combined with soured assets in its Residential Capital LLC mortgage unit, made it difficult for the company to raise capital from private investors. So in addition to $4 billion in aid to support GMAC’s new loans to Chrysler dealers and customers, the government agreed to inject $3.5 billion to help the company bolster its capital cushion. This new arrangement with GMAC will help provide a reliable source of financing to both auto dealers and customers seeking to buy cars, Treasury Secretary Timothy Geithner said Thursday. GMAC is expected to detail its plans to raise the rest of its capital needs by the government’s June 8 deadline. GMAC Chief Executive Alvaro G. de Molina said Thursday the Treasury’s latest action marked another major step in stabilizing and strengthening the company. The Treasury said it won’t immediately hold an equity stake in the lender but will soon exercise its right, under an earlier agreement, to swap an $884 million loan it made to General Motors Corp. for an equity share in GMAC. The Treasury said it expects to exercise that right in the very near future, giving it a 35.4 percent stake in the company. The government also has instructed GMAC to assemble a new, smaller board of directors, which the company has been putting together. It eventually will include the CEO, two trustees appointed by the Treasury Department to represent the government’s interest, and three independent directors to be elected by the rest of the board. The government has a vested interest in seeing GMAC, GM and Chrysler succeed, in order to recoup the billions in aid it has doled out to the companies. General Motors has received $15.4 billion in federal loans and Chrysler has received $5.8 billion. GM is currently negotiating to give the government a 50 percent equity stake in exchange for wiping out a portion of its debt as the company faces a June 1 deadline to restructure or head into Chapter 11 bankruptcy reorganization.
It has requested up to $30 billion in additional loans from the Treasury Department to sustain its turnaround effort. Chrysler said last week it intends to terminate franchise agreements of about a quarter of its 3,200 U.S. dealerships by June 9. GM has told some 1,100 of its dealers about 20 percent that they would be dropped by late next year. Auto dealers say the swift closing of dealerships could lead to significant job losses and leave many dealers with large inventories of unsold vehicles. Sen. Kay Bailey Hutchison, R-Texas, said the new $7.5 billion injection for GMAC would help remaining Chrysler dealerships buy vehicle inventories from dealerships whose franchise agreements are scheduled to end.
____ AP Auto Writer Kimberly S. Johnson in New York contributed to this report.
We love you! We’re mad and sad that Chrysler has chosen to terminate us along with 788 other dealers. It is truly a great American tragedy, and we do not believe it is in the best interest of the new Chrysler company. For 45 years we have served the Abilene residents with quality service, and for six of those years, we have been a good partner to the Chrysler corporation as one of its Five Star dealers. We will remain a Ford and Mitsubishi dealer and continue to not only provide you these two brands’ products, but also our body shop and parts, service, rental car and accessory departments. We are going to fight to remain your Chrysler Jeep dealer. We will be pleading our case to the bankruptcy court, but we are only a small Main Street company, not one on Wall Street. Our chances of success are small. As always, you and our employees are our main concern. I have talked to Mike Dunnahoo, a past chairman of the Abilene Chamber of Commerce and owner of Star Dodge, and he has given me his commitment to continue to provide to you the same Five Star service you have come to expect from us for all your Chrysler warranty needs.
We will still be here to service all your other automotive sales and service needs. Likewise, Blake Fulenwider has given me his commitment to service all of our Clyde customers. Dealers have been and will remain the backbone of our communities. We will stand tall in the face of adversity and help each other through these tough times. Chrysler will not buy back our cars, or our parts, or our special tools, or our signs. We are on our own! They have given us two weeks to sell our remaining cars in the event we do not prevail in bankruptcy court. We cannot assume that David will again defeat Goliath. Chrysler builds a great car, they are innovative, safe and fun to drive. I was excited when I was able to buy the Chrysler Jeep dealership, and I am sad, disappointed and hurt not to be going forward with the new Chrysler company. However, I am proud to be a Texas Automobile Dealer. We will continue to provide you with Ford and Mitsubishi vehicles as well as used vehicles. As always, we will of course provide the Five Star service you’ve come to expect and depend on. Oh yeah, we might throw in a little "I Can" attitude as well. Thanks for the opportunity to serve. Seaton Higginbotham is the general manager of Arrow Chrysler Jeep in Abilene.
Published May 23rd, 2009 | 2 Comments Alley’s Chrysler Dodge and Don Hill Jeep on East Stone Drive in Kingsport are among the 789 dealerships nationwide that could lose their franchises as part of Chrysler’s restructuring plan.
David Grace photo. KINGSPORT Alley s Chrysler Dodge and Don Hill Jeep have banded together with hundreds of Chrysler dealerships across the country and hired a law firm to fight Chrysler s plan to shutter certain dealerships in the next few weeks.
In the meantime, the Kingsport Area Chamber of Commerce is urging local residents to contact Capitol Hill in support of the two Kingsport dealerships targeted to lose their Chrysler franchises. Members of Congress need to hear from you immediately regarding the unfairness of the Chrysler reduction plan and the hardship it is causing dealerships, their employees and the community, reads a chamber e-mail sent out to the community.
Please take a few moments to call or write to urge your representatives and senators to contact the president. Alley s Chrysler Dodge and Don Hill Jeep in Kingsport are among the 789 dealerships nationwide that will lose their franchises as part of Chrysler s restructuring plan. In documents filed in bankruptcy court in New York, the automaker said it wants to shed the dealerships by June 9. Kingsport Chamber CEO Miles Burdine said the plan will damage communities by reducing consumer choice for vehicles and by eliminating potential sales tax revenues for the city from the sale of vehicles.
Plus, Burdine said, both of these dealerships have been very supportive of the community, very helpful to many nonprofits. We don t like what we re seeing, and we would definitely advocate for having these dealerships remain open. In its e-mail, the chamber states the Chrysler plan would recklessly terminate long-standing businesses often in the family for generations in less than a month without buying back vehicle inventory or parts.
The plan also provides no right to appeal this decision; and no analysis of the impact on communities where dealerships will be forced to close, according to the chamber e-mail. Members of Congress should urge the president to revisit the Chrysler plan, provide more transparency, and design a softer landing for dealers, employees and affected communities, the chamber e-mail states.
At Alley s Chrysler Dodge Jaguar Saab, Doug Alley said the rejected dealers nationwide have hired a law firm, Squire Sanders Dempsey, to fight Chrysler s plan in bankruptcy court. The Cincinnati-based law firm has filed a motion asking the court to reject the plan. In case that motion fails, the law firm has filed 62 pages of motions, arguing why Chrysler shouldn t be allowed to do what it plans to do. Rick Hill with Don Hill Jeep could not be contacted on Friday. But Alley said the Hill dealership is participating in the lawsuit along with Alley s Chrysler Dodge. I think it s a reasonably good shot, he said of the lawsuit. It s one of the premier bankruptcy law firms in the country. He said he s hoping local residents will also help in the effort by contacting their congressmen on the issue. And the dealerships, themselves, are contacting Congress. What we re asking the Congress to do don t let them do this to us, Alley said. U.S. Sen. Kay Bailey Hutchison, a Republican from Texas, recently introduced an amendment that would give dealerships slated for closing on June 9 an extra 60 days to shut down operations and sell remaining inventory.
The amendment also states that no funds should be distributed from the U.S. Treasury to an auto manufacturer that has notified a dealership that it will be terminated without providing at least 60 days for that dealership to wind down its operations and sell its inventory. Sixty days are all we re asking for. Frankly, I wish we could go much further, because I fundamentally disagree with the decision to arbitrarily and unnecessarily close down these auto dealers, said Hutchison. The amendment has been endorsed by the National Automobile Dealers Association. I think there s a considerable amount of political pressure coming to bear on the situation, Alley said. While lawmakers wrestle with the issue, Chrysler has told dealerships it will help in trying to place inventory with other dealerships not on the list for closure. Still, Alley said he s trying to sell as many cars and trucks as he can. It is in our interest to sell as many of these Chryslers and Dodges as we can as fast as we can sell them. So we re making deals like never before, Alley said. No matter what happens, Alley said his dealership will not close. He said the business still has its franchises for Jaguar and Saab. And we have 60 years of experience in the car business. We know how to sell used cars, and we have a customer base of about 12,000 people, and we feel pretty sure that most of those customers would still like to come to us for their service, Alley said. Alley s Saab franchise is another question mark in the big picture. Saab is part of General Motors, which is also expected to declare bankruptcy. But GM has said it is searching for a buyer for the Saab nameplate, and Alley said the automaker is optimistic it can make a deal to keep Saab in the United States market. Asked if Auto Max, Alley s used car business on Stone Drive, might be consolidated with Alley s new car center down the road, Alley said it s too early to know. It depends on how it all shakes out. We may have to resize it a little bit, he said. The most important thing to us we re not going out of business. The deals this is a window of opportunity to buy Chrysler and Dodge and Jeep products from the Hills at a price that s not likely to be repeated maybe ever again. To contact your senators and representatives on the issue visit www.senate.gov and www.house.gov or call the Capitol switchboard at (202) 224-3121. # # Discuss This Story Be the first to comment: Sign In or Create Profile . Enter Username Enter Password Well when your company that you works for is told to shut down because of some other peoples doings remember you didn t care about others. There are people in this area that work for these dealerships and car companies. Hope you don t lose your job to.
Dusty Compton / Tuscaloosa News Buy photo Sales manager Mark Odom Jr. looks on at Odom Chevrolet in Eutaw. Wednesday, May 20, 2009. Odom is the son of dealership owner Mark Odom.
onclick="location.href = ‘/RSS-10711-Raleigh-Political-Buzz-Examiner’;" title="RSS Feed"> If you believe in capitalism without government subsidies, then buy a new car from Ford instead.
Ford has not taken any federal bailout funds, having entered the recession in better financial condition than either Chrysler or GM, and so it remains independent, while the other two car companies are coerced, sliced, and subsidized into the kind of car company Mr.
Obama wants. I have decided that to buy a GM or Chrysler vehicle would be akin to endorsing the confiscation and ruination of these companies by government control. It would signal support for the nationalized, government-run three-headed monster that is now Chrysler, and that GM will soon become. It would encourage and reward the unlawful and extortionist confiscation of Chrysler and GM by the executive branch — without due congressional oversight or approval. Purchasing a new vehicle from either of these two companies would further enrich a labor union that used millions of dollars of its members dues to win election for Barack Obama, who then in return confiscated half or more of each companies equity and gave it to the union leadership.
If you believe in a corrupt government, you should buy a new car from Chrysler or GM. No, I do not want either company to succeed. Both organizations should have long ago gone into bankruptcy court. Whatever ultimate cost to taxpayers their final demise might mean, it is worth it, if only to put into the grave the illicit continuation of indefensible wages and benefits to a relatively small group of citizens at the expense of every taxpayer in the country.
But, you say, how unpatriotic! Not only not buying American, but not supporting the recovery of our economy, our (once-great) American companies, and our new president! Don t you want the taxpayer to benefit, and for our investment in these companies to be returned? Actually, no, because it would validate subjective and capricious government intrusion into private enterprise that would be more damaging and more costly in the long run.
It would encourage government takeover of other industries or parts of industries that cannot survive independently in the marketplace. It would lead to a web of government-owned or government-controlled businesses that year after year would require taxpayer funding or support of some kind. Think Amtrak and the Post Office, enterprises that cannot sustain themselves without federal funding — a lot of federal funding. By the way, where are the bankruptcy judges and lawsuits that should be challenging the administration s actions? Are there any shareholders left, and don t they have any legal rights? Have you not noticed that the White House is now running both companies, canceling contracts where it wishes, dividing up assets, changing management? All of this is very questionable legally and constitutionally.
Where is the U.S. Congress? The Constitution states that Congress shall oversee the executive branch. Where is the oversight? Here in central North Carolina, our elected Washington representatives — with the exception of Senator Burr — have so far voted in favor of every piece of White House-supported legislation.
But the restructuring of GM and Chrysler has not been legislated. Congress has had no role. It s time to ask Senator Hagan and Reps. Bob Etheridge, David Price, and Brad Miller: what are you going to do to assert your Constitutional duty as Members of Congress to oversee the actions of the executive branch with respect to the president s seizing of private property that belongs to the shareholders and creditors of General Motors and Chrysler? Do you believe the federal government should nationalize the auto industry and support it for the foreseeable future with taxpayer-funded cash infusions? Today the UAW announced it had reached agreement with GM on wage and benefit reductions as part of a new agreement.
The president, furthering the canard that the union is helping everyone out, hailed the announcement as an admirable step in helping to make GM more competitive. This, after the UAW over the past two decades has bled the company to near death. So, I am not going along with the government s grand auto industry vision, and I hope most Americans will also reject it.
A GOVERNMENT MOTORS CREAMPUFF! I will never buy a vehicle from General (Government) Motors or Chrysler again! For someone who has owned 3 Jeep Cherokees and currently owns a 73 Jeep Commando, this is a bittersweet stand to take.
I do not agree with the bailout of any company with taxpayer money. If any company makes bad business decisions, trusts the government and unions, etc., that company should either prosper or die according to the consequences of those decisions. GM and Chrysler are perfect examples. For years, they both negotiated (read: got shafted) with the UAW to give auto workers benefits far outside of anyone s idea of rational. The results were extremely overpaid workers with extremely expensive benefits plans and overpriced cars that underperformed against foreign rivals. US carmakers paid $2000 more per car than the Japanese. Why? Unions! Now GM is heading towards bankruptcy after billions of taxpayer loans which will end up as taxpayer gifts. In the case of Chrysler, the government owns 51%, the UAW owns 38% and bondholders own 10%. Last week Obama unveiled new mileage standards which will turn US cars into European little weenie cars nobody will want. What in Obama s wildest dreams makes Obama believe he has the knowledge to run a profitable car company? Probably the same dream that makes him believe he can run the USA. Of course, he has never run ANYTHING not even a small company! Since he hasn t ever run anything, he bought himself a car company with our money! I will never buy anything produced by GM or Chrysler as long as the government and unions have their hands in it! I hope they both fail miserably which they will.
Let those companies either reorganize or be sent to the dustbin of history of companies who have made monumentally stupid business decisions. Hussein Hopenchange is an arrogant ass who is wrecking the American economy and destroying the dollar. After a gallon of gas costs $8 and unemployment hits 15%, even the MSM won t be able to save him from the wrath of the American people. Somewhere Jimmy Carter is smiling!
UPDATED: 12:18 pm EDT May 23, 2009 WASHINGTON — President Barack Obama says General Motors Corp. and Chrysler LLC must emerge from their restructuring as "leaner, meaner" companies and that a substantial market awaits them if they make the right decisions. Obama said in an interview broadcast Saturday on C-SPAN that the beleaguered automakers should aim to have product lines that appeal to consumers — and that means fuel efficient and high-performance vehicles that Americans hunger for.
He defended government intervention in the industry, saying the administration could not let either company simply dissolve. "Our auto industry is the foundation for economies all across the Midwest," Obama said, "and ultimately, for the country as a whole. And had we allowed GM or Chrysler simply to liquidate that would have been a huge anti-stimulus on the economy as a whole, and could have dragged us even deeper into recession or even depression."