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Thread: Chrysler

  1. #1
    Senior Member Ken Newcomb's Avatar
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    I have know my first person who is personally being put out of business by Obama. He runs the Chrysler dealership in Tindal, SD and has for many years. He is really devistated. It feels a whole lot different when you actually know someone it is happening to.
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    Senior Member YardleyLabs's Avatar
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    Quote Originally Posted by Ken Newcomb View Post
    I have know my first person who is personally being put out of business by Obama. He runs the Chrysler dealership in Tindal, SD and has for many years. He is really devistated. It feels a whole lot different when you actually know someone it is happening to.
    I feel for your friend. Unfortunately, another way to look at it is that 100% of Chrysler dealers are now effectively out of business because of the bankruptcy. The only question now is whether or not some of them will manage to survive. I suspect that the bond holders are hoping that the Federal government will pay them off to avoid liquidation since I suspect that the amount they will receive from the rescue package exceeds what they would get through liquidation. I continue to have reservations about the rescue in any form and certainly hope that additional money will not be committed to cover bond holder losses or to try to keep all dealers open.

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    Senior Member road kill's Avatar
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    WHO is deciding which Dealers to close and WHY??

    The Dealers are not the cause of this.
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    Senior Member YardleyLabs's Avatar
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    Quote Originally Posted by road kill View Post
    WHO is deciding which Dealers to close and WHY??

    The Dealers are not the cause of this.
    As of now, the choices appear to be:

    1. The sale to Fiat does not go forward because of litigation. All Federal subsidies cease so that Chrysler can no longer make payroll. Chrysler ceases operations and is liquidated. All dealers, employees and vehicle owners are SOL. (In the short term this is the cheapest option for taxpayers)

    2. The sale to Fiat proceeds for most but not all of Chrysler assets and operations with government financial assistance to offset some of the acquisition costs and to finance costs associated with warranties on current Chrysler vehicles. Some current employees and dealers continue as part of the surviving operation controlled by Fiat. Secured bond holders and some unsecured creditors receive a mix of cash and equity financed by taxpayers to offset their losses. Before the sale closes, Chrysler terminates the employees and dealers that Fiat does not wish to retain so that Fiat is not stuck with those liabilities. Those who are terminated and other claims against Chrysler are basically SOL with no recourse against any of the assets acquired by Fiat.

    3. In response to political pressure, the government puts still more billions of taxpayer money into Chrysler to reduce the number of dealerships terminated and to bail out more creditors. (This is the most expensive short term option)

    Under the protection of Chapter 11 bankruptcy, the current management of Chrysler remains in current control of the company under the supervision of the court and with a level of accountability to creditors. The interests of shareholders became largely moot when the company entered bankruptcy.

    As the provider of Debtor in Possession financing, the Federal government has a seat at the table but is not in control of the company. However, its financial interests actually take precedence over the interests of other stakeholders with respect to the funds it is providing since the company declared bankruptcy. The funds provided prior to bankruptcy are largely unprotected. Once a decision is approved by the court with respect to the sale to Fiat and/or liquidation, the Federal government's role in operations ceases except to the extent that there are post-bankruptcy financing agreements that provide the government with an on-going stake.

    In answer to your question, the presumption is that Chrysler made the decision to terminate dealerships to make the surviving operation more attractive and profitable to Fiat. If the sale proceeds, Fiat could presumably decide to close more dealerships or to open new ones. If the commpany is liquidated, the issue is irrelevant since all dealerships will be terminated.
    Last edited by YardleyLabs; 06-09-2009 at 04:33 PM.

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    I have a question. What does having dealerships open cost the car companies. They are separate companies correct?

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    Senior Member YardleyLabs's Avatar
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    Quote Originally Posted by eildydar View Post
    I have a question. What does having dealerships open cost the car companies. They are separate companies correct?
    They are related entities with deeply intertwined financial, operational, and marketing dealings. From the perspective of the bankruptcy, the most salient issues are that having a large number of dealers in a given geographical area reduces dealer margins and ultimately increases financial pressure on the manufacturer to provide off-setting discounts. From the beginning, the entire dealership strategy was a way of limiting competition. Realistically, manufacturers would like to optimize the number of dealers in a way that provides easy consumers access, a high standard for dealership operations, and a low cost of sales and warranty support. The general perception, as I understand it, is that the number of dealerships now in existence is much higher than is desirable given the volume of sales.

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    but why are those things being offered by the manufacturer. Shouldn't the dealers being marketing and what not for their own company. The manufacturer markets but they will be marketing no matter how many dealers they have. Not trying to be argumentative, really don't understand what costs the manufacturer of cars have that will be reduced by closing dealerships.

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    Senior Member Franco's Avatar
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    Quote Originally Posted by eildydar View Post
    I have a question. What does having dealerships open cost the car companies. They are separate companies correct?
    Many of the Chrysler dealerships that ended today were Floor Planned (financed) by Chrysler.

    Only giving the dealers a short time to sell thier inventory was a financial hardship for the dealers.
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    Senior Member IowaBayDog's Avatar
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    Dealer saturation is not the issue Yardley. The majority of the dealerships being closed are being handed to other entities across the street. Cedar Rapids Dodge/Chrysler was put out of business and their neighbor next door was handed the Dodge/Chrysler franchise and started selling those vehicles the next day. The number of franchises in our area has not changed one bit. Pure political payoffs.
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    Senior Member YardleyLabs's Avatar
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    Quote Originally Posted by IowaBayDog View Post
    Dealer saturation is not the issue Yardley. The majority of the dealerships being closed are being handed to other entities across the street. Cedar Rapids Dodge/Chrysler was put out of business and their neighbor next door was handed the Dodge/Chrysler franchise and started selling those vehicles the next day. The number of franchises in our area has not changed one bit. Pure political payoffs.
    What was the payoff and who provided it? As far as I can tell, neither made any political donations during the campaign. Mickey was one of 27 Chrysler dealers closed in Iowa. McGrath, who owns a Jeep franchise, was asked about expanding his operations which is not inconsistent with what I was saying. Are you suggesting that the President decided that McGrath should be given Mickey's franchise?

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