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Thomas Sales & Service employee Jorge Gomez, 23, spray paints a sign for the dealership’s “big sale.” Chrysler has signaled its intent to end its relationship with the dealership, pending a bankruptcy judge’s approval, and co-owner Matt Thomas says he’s not taking any chances and wants to sell as many vehicles as he can.
Rob Kerr / The Bulletin
‘We’ve got to move our inventory real quick’
As Chrysler moves to sever its franchise relationships across the country, dealerships find themselves in a difficult position with little time to act. The sales: Though there will be some deals, don’t expect to drive away in a half-priced vehicle
By Andrew Moore / The Bulletin
Published: May 20. 2009 4:00AM PSTSince learning last week that his Chrysler and Dodge dealership was in jeopardy, Matt Thomas, co-owner of Thomas Sales & Service in Bend, has kicked off what he calls “a big sale” — and the clock’s ticking.
“We’ve got to move our inventory real quick,” said Thomas, who was notified last week that Auburn Hills, Mich.-based Chrysler LLC wants to end its relationship with the dealership — which has been in business since 1937 — along with 788 other dealerships nationwide as part of Chrysler’s bankruptcy reorganization.
A judge at a June 3 hearing at U.S. bankruptcy court in New York City will ultimately approve or reject the plan and Thomas said he’s also appealing the decision. But with roughly 100 Chrysler and Dodge vehicles on his lot, he’s not taking any chances and said he’s going to sell as many as he can.
And while there are likely deals to be had, don’t expect to drive off the lot in a half-priced vehicle, said Greg Remensperger, executive vice president of the Oregon Automobile Dealers Association.
“Lots of consumers will be looking for a fire sale … but dealers still have to get the best deal,” Remensperger said.
Auto dealers buy the cars they sell directly from the manufacturers, who are prohibited by U.S. law from selling directly to consumers. Remensperger said dealers often finance those purchases with third-party finance companies, either a bank or a finance company affiliated with a manufacturer.
When a dealer sells a car to a consumer, it has to make enough money to cover its purchase price, the interest it’s paying on the purchase and a portion of the overhead it pays to run its dealership, said Remensperger. Should a dealer sell a vehicle for less than the amount it paid to purchase it, the dealer has to send the difference to the finance company.
In addition, the longer a car is parked on a dealer’s lot, the more it costs to the dealer in interest, which is why dealers are eager to sell old inventory, Remensperger added.
Under normal circumstances, a finance company is happy to work with dealers based on their franchise agreements with their manufacturers, Remensperger said. Typically, when a dealership loses its franchise agreement, the finance company generally seizes the cars and sells them at auction, often for 40 cents on the dollar, leaving the dealer to pay back the difference, Remensperger said.
But in this case, with Chrysler able to break its franchise agreements due to its bankruptcy filing, the affected dealers are getting squeezed.
“It’s a double whammy,” he said. “They lose the business and they could potentially owe money.”
Chrysler spokeswoman Kathy Graham said that because of the extraordinary circumstances, the manufacturer has arranged for the roughly 2,400 dealers it intends to keep to buy the unsold cars from dealers set to lose their franchise June 9. She said Chrysler would normally offer to buy them back but can’t because it doesn’t have the money.
“We would prefer to have the dealers sell them so they have the opportunity to make some money and continue their customer relationships, but we really don’t expect to see huge fire sale prices because we have dealers that want this inventory,” Graham said. “They are going to be good deals, but it’s not like when a retail store goes out of business and you can expect 70 percent off.”
Dave Hamilton Chevrolet-Jeep of Redmond also was notified last week by Chrysler that the manufacturer wants to break its franchise agreement. The company indicated last week it would not appeal the decision.
Jim Smolich Motors in Bend, which already has a Jeep dealership, is not at risk of losing its dealership and stands to gain the Chrysler and Dodge brands, according to the dealership. This is consistent with a 5-year-old Chrysler plan to consolidate its three main brands — Chrysler, Dodge and Jeep — under one dealer roof, Graham said.
Chrysler’s moves are on top of a similar plan announced last week by General Motors, in which it said it would not renew the franchise agreements of roughly 1,100 dealers when those agreements expire in October 2010. Dave Hamilton Chevrolet-Jeep of Redmond and Bob Thomas Car Co. of Bend are among those GM dealerships notified last week.
Thomas said all of Chrysler’s purchase incentives — such as “cash allowance” offers for up to $4,000 on some models that allow the buyer to apply the money against the purchase price or receive it in the form of a check — are still available through June 9.
“It’s definitely a buyer’s market … but it’s not like all of a sudden the cars aren’t worth anything, that’s not reality,” Thomas said. “We’re still in business.”
Thomas Sales & Service also sells Subaru-model vehicles.
Andrew Moore can be reached at 541-617-7820 or amoore@bendbulletin.com.
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