GMAC pulls 150 cars from GM dealer. Dealer gets new lender. New cars coming next week.

[Bozita]

Alex Slitz/The Saginaw News
The parking lot of Zehnder Chevrolet, 511 North Main Street in Frankenmuth is left empty after a refinancing deal was struck with an unnamed company, and GMAC, Zehnder's former financier withdrew its inventory, Zehnder Chevrolet expects a new inventory of vehicles sometime next week.
"It looked scary," Frankenmuth Downtown Director Sheila Stamiris said.


GMAC pulls cars from Frankenmuth's Zehnder Buick and Chevrolet; dealership says new cars arrive next week
by Brian Brunner | The Saginaw News
Friday May 01, 2009, 4:43 PM

A truck carrying about 10 new cars left an empty sales lot at Zehnder Buick and Chevrolet, 511 N. Main in Frankenmuth at 1:17 p.m. Friday.

Visibly agitated workers milled about the dealership's office.

An ominous sign hung on the front door: "Due to pending changes, the sales department will be closed until further notice."

Despite gloomy appearances, however, Stamiris said the removal of almost 150 new cars was part of a pre-emptive business move for the dealership to stay in business.

In a press release, owner Martin Zehnder said GMAC removed its inventory to make room for new inventory financed through a new lender.

more...

http://www.mlive.com/business/mid-michigan/index.ssf/2009/05/gmac_pulls_cars_from_frankenmu.html

[Hannah Bell]

1. kicking not only workers, but small businesses, to the curb.

"Terry Weiss, general manager at Mike Young Pontiac GMC, 312 N. Main, said a stated goal in General Motors' liability plan is to cut the dealerships from 6,200 to about 3,600"

[jmowreader]

2. I can't figure this out. There are two reasons:

First, if you were trying to bail your way out of bankruptcy wouldn't it make sense to ensure you had as wide a distribution net as you could assemble?

And second, all auto dealers are independent businesses. There are some massive multi-outlet dealers (Hendrick Automotive Group comes to mind quickly--there are Hendrick dealers from coast to coast), but a lot of them are still one-outlet shops, or sometimes one-city shops. Isn't this going to fuck up a lot of local economies?

This looks like it's about floorplanning--the loans car dealers take out to buy inventory. Telling these folks they need to arrange new floorplanning is better than just throwing them out of business.

[ThomWV]

4. What I really can't understand is the reported GMAC extension of credit to Chrysler buyers

I caught a piece on NPR the other day that said that Chrysler buyers were being offered credit through GMAC. So it can't be that they feel a crunch in funds available to lend for the purchase of competitors product if they haven't already made all the funds their own dealers can extend available first, can it?

I mean, if you can't afford to floorplan your own dealers why on earth would you extend credit to your competitors customers?

[Hannah Bell]

5. it's been announced elsewhere they want to cut their dealer contracts.

yes, it's going to fuck up a lot of local economies.


http://www.thetruthaboutcars.com/gm-declares-war-on-gm-dealers/

As part of Viability Plan III, GM announced its intention to close 42 percent of its bloated dealer network, reducing the number of stores to 3,600. That’s a cut of 2,600 dealers. Our take on that part of that part of the new new new new new new new new turnaround plan: a Mandarkian laugh. American car dealers are covered by 50 states worth of franchise laws; politicians don’t get elected without the support of their local or state dealers’ council. Any dealer cull would have to wait for a bankruptcy judge. Nuff said? Apparently not. Wards’ Dealer Business reports that The General is laying the groundwork for an anti-dealer jihad, regardless of the “niceties” of C11.

[LeftyMom]

6. I think the idea is that more dealers than a market needs drives down prices.

To make up an example: I live in Sacramento, CA. If I decide tomorrow I want to buy a Chevy Malibu, there are 93 2009 Malibus at five dealers listed on Cars.com within 30 miles of my house, so I can totally shop around, threaten to go to another dealer if I don't get a good deal, and generally play them off of each other to get the price down. If there were only two or three Chevy dealers in town, that would limit my ability to negotiate the price down, but would not reduce my access to the product in any significant way.

I think it's probably more complicated than that, but if I'm not mistaken that's the argument for reducing the number of dealers.

[Hannah Bell]

8. They want to default on their existing contracts with dealers.

Bankruptcy helps them do so.

Withdrawl of credit, shutdown of supply chains helps dealers go out of business without having to default - ah, the magic of the market.

[MicaelS]

13. GM problems have always been too many....

Too many car lines, too many duplicate models, far too many dealers. As a consequence, GM built cars to please their dealer network, as opposed to pleasing the car buyer.

[jmowreader]

16. They DEFINITELY need to get rid of the "duplicate model" problem

What, exactly, is the difference between a Buick LaCrosse and a Chevrolet Impala? Certainly it's less expensive to just put leather seats and an upgraded dash in an Impala and call it a Buick than it is to design a real Buick...but what's the point? I remember back a long time ago when Chevrolet and Pontiac were entry-level cars and you upgraded to Buicks, Oldsmobiles and finally Cadillac as your financial wherewithal improved. Now Chevys and Buicks are the same thing.

[ThomWV]

3. What do they gain by that?

[Hannah Bell]

7. GM, Chrysler want to thin ranks, but contracts get in way

Car dealers — sponsors of Little League, fixtures of Main Street, vibrant symbols of the American entrepreneurial dream — could now prove the biggest threat to the future of the very industry they built.

Now, with the industry in crisis, the car dealer poses a major obstacle to the rehabilitation plans of the nation's two most desperate carmakers, General Motors Corp. and Chrysler.

Economists, industry analysts and the automakers themselves agree that there are too many outlets for GM and Chrysler vehicles.

Thinning dealer ranks — now nearly 10,000 combined for the two companies — is key to cutting the two automakers' costs, ensuring that those dealers that do survive are more profitable and provide better service.

http://www.modbee.com/business/story/668220.html

[DainBramaged]

10. The dealers HAVE to disclose their financial status each month to GM

it is part of the franchise agreement (and part of the software system they use, automatic reporting). If the dealer is under-capitalized, has a bad CSI (Customer Satisfaction Index) or sells too few cars per month for the area compared to other GM dealers, the dealer has violated the terms of the Franchise agreement and poof, goodbye.

[FarCenter]

11. Too many dealer add to much cost to distribution and keep prices too high

The dealers' cost of doing buisiness have to be recovered in the prices of the vehicles that they are selling.

Having too many small, inefficient dealers means that the prices to the customers are too high.

Actually, you should be able to order from GM on their web site and have the car delivered direct to your house.

[quiller4]

12. Years ago most dealers had flooring or financing agreements

with local banks. Then GMAC and Ford Motor Credit offered great terms and got almost all flooring business from dealers. Now GMAC is pulling financing from "marginal" dealers many of whom still do a good business. Some of these dealers will again obtain financing from local or regional banks and stay open. Others will close for lack of a way to finance inventory.

[DainBramaged]

9. Where I live, there are 50 Chevy dealers (alone) not including all other brands

in a 50 mile radius. There are too many dealers for the sales volume. Within 10 miles of where I work, there are 7 Chevy dealers, 4 Buick/Pontiac/GMC dealers, two Pontiac only dealers, 3 Cadillac/Hummer. But there are 3 Toyota dealers and 2 Honda dealers, one Mazda, one Nissan in that same 50 mile radius.

Makes ya wonder.

[MicaelS]

14. That's it in a nutshell, too many dealers. n/t

[csziggy]

15. On the other hand, here the GM dealers are cut to the bone.

The Buick/Cadillac/GMC/Hummer dealership closed over a year ago. There is one Chevy dealer in town who also can handle other GM lines. In the next county to the west, there is another GM dealer barely hanging on by a thread or maybe even closed by now. Over the state line to the north, another GM dealer. Each of these dealers is at least 50 miles apart.

There used to be separate Buick, Cadillac, Pontiac, Olds, GMC, Chevy dealers just in this town. The Chevy dealer had a separate truck lot. When the idiots at the Chevy place would not complete an order for a new Chevy truck, I could go across town and find a better deal at the GMC dealer. Now, the options are less unless I want to go to the internet and search for a better deal - which is exactly what I did for my last truck.

[Synicus Maximus]

17. Within 15 miles of my house

there are 3 Chev dealers, 3 Buick dealer and 2 Caddy dealerships. One of the Chev and Buick dealers are owned by the same company. But 8 dealers in 15 miles seems a tad excessive to me.