Car Dealers on Brink: Chrysler Alone May Lay Off 140,000 Employees from JUST Dealers

bruceistheone · Apr 21, 2009

We don't need manufacturing in America. Banks account for most of our GDP. Everybody can work for a bank. I think they will start hiring soon.

IanMacQuaide · Apr 21, 2009

Quote from bruceistheone:

We don't need manufacturing in America. Banks account for most of our GDP. Everybody can work for a bank. I think they will start hiring soon.
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Yes they will. Banks will be hiring Auctioneers.

ByLoSellHi · Apr 21, 2009

I've been specifically looking at one and two year old CPO BMW 5 and 7 Series, and anyone who claims that they're not available now at substantial discounts compared to a year and especially two years ago (comparably equipped one and two year old models at that time) is CLUELESS.

Debaser82 · Apr 21, 2009

Quote from ByLoSellHi:

I've been specifically looking at one and two year old CPO BMW 5 and 7 Series, and anyone who claims that they're not available now at substantial discounts compared to a year and especially two years ago (comparably equipped one and two year old models at that time) is CLUELESS.
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BLSH, wont the hungry mob trash your ride when you take it out on the street?

Or do you live in one of those gated communities?

Cheers.

ByLoSellHi · Apr 21, 2009

Quote from Debaser82:

BLSH, wont the hungry mob trash your ride when you take it out on the street?

Or do you live in one of those gated communities?

Cheers.
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We park our cars in our garage, and we have a great police department, and live in a safe community.

We are headed for much worse economic times, however, and even wealthier areas are going to get hit hard with crime, if they haven't already.

I've already heard from some relatives who live in both Pompano and Coconut Grove, and property crime in those areas has definitely picked up.

Sushi · Apr 21, 2009

Ofcourse the car of choice for the corporate mid level slave class is discounted. I would suspect bmw to be next to worthless as the yuppie slave wannabes either grow up or run out of money. Pretty funny!

Dr. Zhivodka · Apr 21, 2009

You know BiLo...

I'm quite more interested in your RE commentary than your posting of dead dealerships. That is of course unless your Dad owns tons of car dealerships too.

More RE.

Quote from ByLoSellHi:

Chrysler, which borrowed $4 billion, hasnât publicly discussed discontinuing individual brands. If the Auburn Hills, Michigan-based carmaker doesnât form an alliance with Fiat SpA, it said it will wind down operations, including all three brands, which support 3,300 dealerships that employ 140,000.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aSefFiFMRV2I&refer=home

Dealer Jobs Disappear as GM, Chrysler Bankruptcy Threat Looms
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By Doron Levin

April 21 (Bloomberg) -- Martin âHootâ McInerney, an auto retailer in southeastern Michigan for about 40 years, sold his Cadillac dealership for $5 million last year rather than wait for General Motors Corp. to determine his fate.

âHow many Cadillac dealers will GM decide it needs?â said McInerney, 80, who still owns seven other dealerships. âSomeone says 600, maybe itâs only 150.â

Thousands of GM and Chrysler LLC dealers across the U.S. are preparing for the probability that as many as 5,000 of them will be forced to close because of an automakerâs bankruptcy. Dealers say theyâre ordering fewer vehicles, cutting expenses, retiring debt and firing workers to preserve cash.

âWeâre ahead of the curve and ready to absorb shocks if one of these manufacturers liquidates,â said Sid DeBoer, chief executive officer of Lithia Motors Inc., a publicly owned dealership chain that said it relies on Chrysler brands for 32 percent of its revenue.

Lithia, based in Medford, Oregon, has sold or shut 17 stores in the past year, using $100 million in 2008 from sales of stores and other property to help reduce debt 19 percent to $645 million, according to data compiled by Bloomberg. Lithia has cut its workforce to 4,500 from 6,000 a year ago.

Brands at Stake

GM, negotiating a restructuring with the U.S. Treasury Department after borrowing $13.4 billion, has said repeatedly it will sell or end the Saab, Hummer and Saturn brands. Pontiac and GMC are both under review, people familiar with the matter said. Chevrolet, Cadillac and Buick are GMâs other U.S. brands and are also sold in other markets.

Chrysler, which borrowed $4 billion, hasnât publicly discussed discontinuing individual brands. If the Auburn Hills, Michigan-based carmaker doesnât form an alliance with Fiat SpA, it said it will wind down operations, including all three brands, which support 3,300 dealerships that employ 140,000.

âIâm urging all of our dealers not to spend money they donât have to spend,â said Earl Hesterberg, chief executive officer of Group 1 Automotive Inc., a publicly owned dealership chain based in Houston, Texas. âOf all the brands in peril, Iâm least worried about Chevrolet. There will always be a Chevrolet.â It is GMâs best-selling brand.

For dealers, franchise cancellation means the abrupt loss of the right to sell new vehicles and spare parts, as well as to service vehicles under warranty. Each dealership, including building and equipment, often represents an investment of $1 million to $10 million.

GM Declines

GM closed Monday at $1.66 a share, down 92 percent from a year earlier. GMâs $3 billion of 8.375 percent bonds due in 2033 rose 1.15 cents to close at 9.65 cents on the dollar in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The Detroit-based automaker has lost $82 billion since 2004, its last profitable year.

U.S. sales of new cars and light trucks plunged 18 percent last year as energy prices rose and consumer confidence fell. The sales rate in the first quarter of this year was the lowest since the fourth quarter of 1981.

U.S. automakers, which have more dealers than their foreign counterparts, have said for years that they want to consolidate their retail networks as market share has fallen. According to the National Automobile Dealer Association, the average Chevrolet dealer sells 586 vehicles per year, while the average Toyota brand outlet sells 1,821.

âVery Leanâ

U.S. auto dealers have been protected for decades by state franchise laws, which make unilateral termination of their franchises difficult, if not impossible. The federal code trumps state law, say bankruptcy experts, allowing the automakers to shrink their retail networks at will.

Anticipating weak demand for vehicles as well as the potential collapse of Detroit automakers, Autonation Inc., the biggest dealer chain in the U.S., âcut vehicle orders 60 percent in the first quarter,â said spokesman Marc Cannon. âWe intend to keep ordering very lean.â

Michael Charapp, an attorney in McLean, Virginia, who has 300 dealer clients, said âwe tell them cash is king. Youâve got to keep the business lean in case something happens. Nothing should be spent on anything but essentials. Cut back on personnel.â

Chrysler must merge with Turin, Italy-based Fiat by May 1 or risk the cutoff of rescue funds from the Treasury. GM, whose deadline is June 1, said in February it intended to shut down 2,100 of the 6,248 dealers it had at the end of 2008.

Who Keeps Going

That leaves dealers wondering who has to close shop and who gets to keep going. âYou donât really know which way to run, what to tell your employees,â McInerney said, adding his son was âdisappointedâ about not getting to inherit the family Cadillac business.

If a dealer does get his or her franchise canceled, calls from bankers wonât be far behind. Most loan agreements for dealer inventories require immediate repayment in the event of bankruptcy. According to the NADA, the average dealer inventory loan is $4.9 million; dealers collectively borrow about $100 billion nationwide.

âIf thereâs a bankruptcy, things will happen quickly,â Charapp said, noting that bankers usually have the right to seize and sell unsold vehicles to recover their loans. âThe automakers wonât have time to be too selective. If theyâre not careful theyâll lose good dealers who quit because they lose their wholesale financing.â

Other Brands Affected

The repercussions from GM and Chrysler franchise cancellations could spread swiftly to other carmakers. According to the NADA, there were 19,790 new-car dealerships in the U.S. as of March 1, fewer than 3,000 representing a single brand. Since most dealers own multiple franchises, their borrowings often cover multiple brands and properties.

If vehicles in a Chrysler showroom were seized and sold at auction, for example, the proceeds might not cover the dealerâs loan. A lender could thus demand repayment on related loans covering the dealerâs non-Chrysler brands.

âWeâre warning Toyota dealers to watch out, to segregate their finances as much as possibleâ from those of their GM and Chrysler businesses, said Jerry Pyle, chief executive officer of Gulf States Automotive Group in Houston, Texas, a Toyota Motor Corp. wholesale distributor.

A reason for keeping inventories tight is that panic- selling of unsold vehicles after a GM or Chrysler bankruptcy almost certainly would drive down prices and the value of all dealersâ vehicle inventories.

âIf the banks dump their collateral on the market, that would be a disaster,â said David Fischer, a multi-line dealer based in Troy, Michigan.

To contact the reporters on this story: Doron Levin in Southfield, Michigan, at dlevin5@bloomberg.net
Last Updated: April 21, 2009 00:01 EDTp
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ByLoSellHi · Apr 21, 2009

Quote from Dr. Zhivodka:

You know BiLo...

I'm quite more interested in your RE commentary than your posting of dead dealerships. That is of course unless your Dad owns tons of car dealerships too.

More RE.
More...

That's a Bloomberg story about the impact, nationwide, that shuttered dealerships will have on the unemployment rate - not even speaking to the factory and white collar jobs already lost and still being lost in the face of Chrysler and GM bankruptcy reorganization.

I have no idea what your ragging about. Take two Pamprin and call your OB/GYN in the morning.

Dr. Zhivodka · Apr 21, 2009

Well of course I was sincerely asking for more RE commentary and less Bloomy.com yack...which we can all get.

Quote from ByLoSellHi:

That's a Bloomberg story about the impact, nationwide, that shuttered dealerships will have on the unemployment rate - not even speaking to the factory and white collar jobs already lost and still being lost in the face of Chrysler and GM bankruptcy reorganization.

I have no idea what your ragging about. Take two Pamprin and call your OB/GYN in the morning.
More...

ByLoSellHi · Apr 21, 2009

Quote from Dr. Zhivodka:

Well of course I was sincerely asking for more RE commentary and less Bloomy.com yack...which we can all get.
More...

I really don't see what the problem is with Bloomberg (since few other media outlets are doing so) informing the investment community that 140,000 employees work at Chrysler dealerships, alone.

I wasn't aware of that fact, and would have naively guessed maybe 30,000 at most, if forced to hazard a guess.

And then, it begs the question of how many people work at General Motor's dealerships, as GM has approximately 5x the number of dealers Chrysler does, I think.