Chrysler May Drop Another 145 Dealers

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Chrysler May Drop 145 Dealers on Lack of Financing

Nov. 18 Chrysler Group LLC may have to terminate as many as 145 more U.S. dealers unless the retailers can find lenders to finance their new-vehicle inventory.

GMAC Inc., which replaced Chrysler Financial as preferred lender for the Auburn Hills, Michigan-based automaker’s dealers, has been negotiating with Chrysler retailers, said Sue Mallino, a GMAC spokeswoman.

If dealers can’t get the financing from GMAC, they may lose their franchise agreement unless they can find another lender, said Kathy Graham, a Chrysler spokeswoman.

The outcome may mean fewer dealerships for Chrysler, which has about 2,400 U.S. outlets after terminating 789 as part of a government-aided bankruptcy reorganization. Chrysler exited court protection after six weeks on June 10 under the control of Fiat SpA. GMAC took over preferred financing duties for Chrysler dealers as part of the reorganization.

Of about 1,500 dealers that applied to Detroit-based GMAC to finance their vehicle inventory, about 90 percent will qualify, Mallino said. She said 85 dealers have been refused such financing and 50 to 60 others are still in negotiations.

GMAC said it has asked some dealers for more collateral as a condition for financing.

Financing Snag

Mike Wolcott, owner of two Chrysler-Dodge-Jeep dealerships in Pittsburgh, said he has been unable to convert interim vehicle financing with GMAC into permanent funding.

Chrysler Financial, owned by Cerberus Capital Management LP, holds mortgages on his dealerships and has declined to subordinate its interest in those loans to GMAC, Wolcott said. GMAC wants that as a condition to lend him money to buy vehicles, he said.

Chrysler Financial “is playing chicken to force us to find other mortgages so they can cash out,” Wolcott said. He said he’s contacted “six to eight” lenders about refinancing the $6.5 million loan on his two dealerships, without success.

Amber Gowen, a Chrysler Financial spokeswoman, said the lender “continues to cooperate with GMAC and Chrysler Group LLC to transition the dealer network, including the critical and prompt redistribution of vehicles and dealership financing.”

LINK: Chrysler May Drop 145 Dealers on Lack of Financing (Update1) - Bloomberg.com