Car Dealerships Feebly Fight Back Against Bankrupt Automakers

As GM’s bankruptcy looms, let’s take a look at what might be in store for its network of dealerships. Chrysler dealers are understandably angry at the company’s shutting down of dealerships, refusal to take back unsold inventory, and general inability to, in the words of Jon Stewart, “be a f@#king person.” Or ethically behaving corporate entity, whatevs.

Those dealers, though? They’re fighting back. With lawyers.

They’re not likely to win, but they’re going to try. Last Friday, BusinessWeek covered their fight:

“Last year, we bought far more vehicles from Chrysler than we needed to help them out-and because they asked us to-and now we have to sell them for whatever we can get, at a loss,” says [Texas Dodge dealership owner Nicholas] Parks. The interest costs on carrying the excess Chrysler vehicles last year swelled from $15,000 per month to $50,000. Parks has joined with other dealers in hiring lawyers to represent them in the bankruptcy case, although most experts say that the dealers have scant legal hope of gaining much in such a forum.

In an automaker bankruptcy filing, dealerships with excess inventory that they can’t sell become unsecured creditors—after all, the automaker owes them money. They can sell the vehicles, at a significant loss, to anyone out there who’s able to buy a new car right now. Or they can wait for whatever tiny amount of money they stand to collect in the bankruptcy proceedings. The former is the best option, but it’s a very unappealing one.

A Saturn dealership in Olympia, Wash. saw this coming, and decided to terminate its GM franchise agreement before the company could declare bankruptcy. Worried that they might be treated as an unsecured creditor as a Saturn franchise, the owners have rebranded Saturn of Olympia as a general used car dealership. This may turn out to be a wise business decision for other reasons, too:

Service manager Don Fritz, a Saturn of Olympia employee for the past three years, said Thursday that he welcomes the change to Olympic Auto because too much speculation about the Saturn and GM brands had slowed business.

Angry Car Dealers Try to Fight Closings [BusinessWeek]
Saturn dealer switches to used [The Olympian] (Thanks, Ben!)

(Photo: Karim-m)

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.