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Discussion Starter · #1 · (Edited)
I know I'm not to popular with my outlandish remarks, but I have some insight on how dealers are reacting to the possibility of their respective automaker going bankrupt. It really started more than two years ago, but dealers are more fearful now than ever. I have many domestic dealer freinds in the Detroit metro area and all are getting similar advise from their wary accountants.
Accountants are warning their dealership clientele that selling cars for a bankrupt automaker won't mean business as usual. The obvious pitfalls include, no sales financing, no warranty reimbursement, and the possibility of a canceled franchise. Regardless of how well a dealer is capitalized, failure may be imminent. They are also being reminded there won't be anybody to hold liable for breach of contract. You can sue anybody you want, but it helps if they have money.
Dealers are being told to minimize their assets tied up in their dealership in case the unthinkable comes faster than planned. The whole exit strategy is based on having no cash at risk.
The plan is to take all the money out of the company, regardless of tax consequences. I don't want to bore you with subchapter S details, but taking money out of a dealership can be tricky. This would require the dealer to floor plan as much as possible, if the automaker goes belly up, the inventory is someone else's problem. Dealers will have to secure a line of credit from the bank to make payroll, something that may no longer be available to them.
If they own the property and building in their own personal name, it will still be theirs if the dealership folds. Unfortunately, some dealers land is owned by their company. If the franchise folds, obviously the bank will foreclose. This really isn't a problem if the property is worth less than the payoff. But some dealerships have equity in their property. If the company has any equity in the property and building, that money is at risk. The dealer could try to refinance the property and put the cash in their pocket, but it's highly unlikely under the current circumstances. Some dealers where thinking ahead as far as five years ago and took appropriate actions.
I don't have to remind you how this affects the consumer, but I'll tell you anyways. With the dealership operating on borrowed money, expenses are high and that makes it harder for dealers to give better prices. The workforce is minimized and customer service is lower than expected. Less inventory means less choices. They may not even be interested in ordering you a vehicle.
I think you get the picture by now. Although the domestic auto manufacturers are refuting bankruptcy, the dealers are preparing for it.
 

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I don't see any outlandish remarks here.

While not discussing this topic openly with employees, I'd say any dealer on the ball has been working on these exit strategies. Having worked for dealers representing several manufacturers since the late '70's, I thought I had seen it all, but these times are a whole new ball of wax.

Currently being a warranty administrator I keep a keen eye on how GM pays their claims. It's kind of scary right now.
 

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Discussion Starter · #3 ·
I don't see any outlandish remarks here.

While not discussing this topic openly with employees, I'd say any dealer on the ball has been working on these exit strategies. Having worked for dealers representing several manufacturers since the late '70's, I thought I had seen it all, but these times are a whole new ball of wax.

Currently being a warranty administrator I keep a keen eye on how GM pays their claims. It's kind of scary right now.
Thanks for your reply. I have been labled a Troll many times.
People don't realize, if the the Big Three doesn't have an effective dealer network, bankruptcy is the only option. You can't make money building cars and trucks if no one is willing to make the investment to sell them. This is more important than mergers and layoffs. The dealers are abandoning ship and the auto executives have never been more arrogant about the crisis that is unraveling. Auto execs are concentrating on Wall street issues, and letting their dealer network crumble.
The domestic automakers have had poor relations with dealers over the past years. The Big Three have pushed inventory on their dealers using deceptive incentive tactics and empty promises. Most dealers have been secretly preparing to jump ship and leave their creditors holding the bag. A lot of those creditors are the factories financial arms.
This is a major issue that no one seems to talk about. Nobody has brought the fact up that the dealers might not be around to keep the domestic automakers in business. Would you invest millions in a donmestic auto franchise right now? The big three are currently pouring huge money in R&D, but it won't make a difference if the public can't buy the new product. Maybe they should be investing in their dealer networks instead. You can't sell cars without a strong well capitilized dealer network and that's a fact!!
 
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