Oct22
WASHINGTON -- The National Automobile Dealers Association is trying to negotiate a deal between GMAC Financial Services and Chrysler Financial to help Chrysler dealers transfer their inventory credit lines to GMAC.
Some Chrysler dealers are caught in a tug of war between the two finance companies over which lender should have priority over the dealership assets, said Forrest McConnell, chairman of the regulatory affairs committee for NADA, in a message to members.
If the dispute isn't resolved quickly, the dealers could go out of business. They need to be able to finance their inventory to sell more vehicles.
Transition issues
The conflict involves dealers who have floorplan, or inventory financing, as well as other commercial loans such as a mortgage or working capital loan through Chrysler Financial. Chrysler Financial wants dealers to pay off all their obligations before transferring their floorplan credit lines to GMAC.
But not all dealers have the cash or alternative credit lines to immediately pay off those debts. And if they can't, Chrysler Financial wants to retain the priority lien on the dealership assets, including the vehicle inventory. That means Chrysler would be first in line to be reimbursed if a dealer defaults and the assets are liquidated.
But GMAC won't provide floorplan credit to dealers unless it has the priority lien on the vehicle inventory.
"Dealers are stuck in the middle," wrote McConnell, a Honda and Acura dealer in Montgomery, Ala. "GMAC has indicated that it will not finance a number of these floorplan loans without priority, and Chrysler Financial is not willing to give it up."
GMAC confirmed it had sent letters to 29 dealers representing 41 Chrysler dealerships telling them they would need to meet certain conditions including additional collateral to obtain floorplan financing.
"These dealers have large real estate and working capital loans from Chrysler Financial that GMAC cannot refinance due to its lending guidelines and regulatory policies," GMAC President Bill Muir said in a statement. "GMAC is hopeful for a resolution to be able to provide wholesale financing to these dealers."
NADA plays middle man
NADA recently helped resolve a similar dispute with Chrysler Financial, McConnell pointed out. Chrysler Financial was refusing to let Chrysler dealers move their floorplan to GMAC or other lenders unless they paid large sums of money into a reserve account.
Chrysler Financial would use the reserve funds to cover future refunds on canceled extended service contracts and other aftermarket contracts the dealers sold their customers.
"NADA urges Chrysler Financial and GMAC to resolve this impasse at the earliest possible time," McConnell said. "The availability of these loans is of vital concern to dealers and for Chrysler."
GMAC replaced Chrysler Financial as Chrysler dealers' primary lender for subvented retail car loans and leases and for floorplan as part of Chrysler's government-brokered restructuring plan earlier this year. Muir says about 1,500 Chrysler dealers applied to GMAC for permanent floorplan financing and nearly 900 have completed the process.
The "vast majority" of the remaining dealers are approved, and GMAC is finalizing the loans, he says.
Chrysler Financial spokeswoman Amber Gowen said her company is cooperating with GMAC and Chrysler Group to ensure a "smooth transition" to GMAC.
But many dealers say the transition has been bumpy.
"Before Chrysler's bankruptcy, floorplan lenders used to cooperate when a dealer wanted to shift business over to a new lender," says Michael Charapp, a McLean, Va., dealer attorney. "Chrysler Financial changed the rules in midstream."
SOURCE: [ AutomotiveNews.com ]
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