After the Chrysler Group LLC bankruptcy and restructuring this past summer, the original financing arm of Chrysler was done away with and GMAC was named as the finance company for Chrysler dealers going forward.
This past Saturday, The Detroit News reported that some dealers reported being told by GMAC and Chrysler officials that many, maybe even hundreds, of dealers might not qualify to finance with GMAC.
Now GMAC’s Financial Services President, Bill Muir, has announced that the number of dealers that will be unable to obtain GMAC financing will be smaller than expected.
“Nearly 900 have completed the process to convert from the interim to post-interim wholesale credit lines,” Muir said. “The vast majority of the remainder are approved, and GMAC is completing dealership visits and documentation to finalize the loans.”
When the U.S. Treasury Department gave Chrysler the loans that kept it afloat during bankruptcy proceedings, they stipulated that Chrysler Financial would not be able to offer the “floor plan” financing for Chrysler dealers. Floor plan financing is what enables Chrysler’s 2,400 dealers to stock their showrooms with new vehicles.
GMAC has provided temporary loans to the dealerships, but permanent loans for the 1,500 dealers who applied for them are not scheduled to reach the approval phase in mid-November. GMAC is actually a bank and will be providing floor plan and consumer financing for the dealers.
Muir stated that GMAC is “working aggressively” to do what it can to support Chrysler dealers.
Some details still need to be ironed out, such as which financing company has first claim on assets in the case of a dealer bankruptcy and closing. GMAC holds the floor plan debt, but Chrysler Financial holds the real estate and capitol loans.
Some Chrysler dealers are finding themselves in financial hot water. Some don’t have enough equity in their dealerships to pay off old Chrysler Financial loans; as a result, they cannot receive GMAC loans or other outside loans and some have had to close their doors.
GMAC has reportedly sent letters to 29 dealers who own 41 Chrysler dealerships. The letters explains that they do not qualify for financing through GMAC, mostly due to insufficient collateral.
Muir had this to say about the situation: “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 is hopeful for a resolution to be able to provide wholesale financing to these dealers, as we want to continue our business relationship in support of their stores and their markets.”