For some Chrysler dealers, the transition from financing through Chrysler Financial to GMAC has been a bumpy road. There are currently at least 41 Chrysler dealerships caught in the legal crossfire that has arisen as both financing organizations claim priority liens on the dealer’s assets and prevented them from ordering new inventory. The priority liens being argued over place the lien holder first in line ahead of other creditors in the event a dealership defaults or goes out of business and liquidates their assets.
The dealerships in question had previously received financing through Chrysler Financial and subsequently attempted to establish new floorplan lines of credit with GMAC financial Services as mandated by the federal government and United States bankruptcy courts.
Unless Chrysler Financial and GMAC can reach a settlement in the near future, the dealerships may be forced out of business due to the lack of inventory.
The NADA is attempting to cobble an agreement between GMAC and Chrysler Financial to facilitate the transfer of floorplan financing.
Currently, 1,500 Chrysler dealers have applied for the transfer from Chrysler Financial to GMAC. Of those, 900 dealers have already completed the process according to GMAC Financial Services.
Bradley Miller, an NADA attorney, said the number of dealers that could be adversely affected by delays in approving the transfers may be larger than the 600 reported by GMAC.
In addition to floorplan financing through Chrysler Financial, some dealers have additional commercial loans, including working capital loans and commercial mortgages. Chrysler Financial has so far insisted that dealers satisfy all their existing financial obligations before transferring to new floorplan lines of credit with GMAC. However, most dealers claim they don’t have the available cash or alternate lines of credit needed to immediately pay off their loans from Chrysler Financial. For those dealers, Chrysler Financial has refused to give up their priority liens on assets including vehicle inventory. Likewise, GMAC has refused to provide floorplan financing without receiving priority liens on the new vehicles it would be financing. It’s the classic “Catch 22” dilemma for dealers.
GMAC has sent letter to 29 auto dealers who represent the 41 Chrysler dealerships offering to extend floorplan financing to those who are willing to meet certain criteria including putting up additional collateral to secure the loans.
GMAC president Bill Muir defends the company’s position saying, “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.” He also said, “GMAC is hopeful for a resolution.”
Amber Gowen, a spokeswoman for Chrysler Financial, also expressed optimism that a resolution will be reached and said that the company is cooperating with GMAC to ensure a “smooth transition” for dealers.