Letter from a Dodge Dealer

Quote from Shreddog:

I agree it would be nice, but the last Republican made sure the bondholders of BSC, AIG, LEH, and MER were kept whole. I don't think this Republican politician exists, at least not by the time he becomes president.
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I picked this quote, but there were many to chose from- you need to educate yourself. This isn't a political issue, it's a LEGAL one. The fact that bondholders keep their place in line is related to the LAW not to who occupies the White House. Bondholders in the Chrysler case got ass-raped.
As for the dealerships, why did these select dealers have to be shut down? Nobody can really answer that question. What business is it of the Fed Government to decide who stays in business and who doesn't. If this gentleman was paying his bills, meeting payroll, paying his taxes, who's he hurting?, Certainly not the taxpayer. If he's not able to stay in business, guess what- there are already WELL-DEFINED avenues for him to go out of business, and the govt doesn't have to have ANYTHING to do with it.
This has nothing do do with any political ideology, but from reading what you're writing, I'm guessing that you'll never be able to see that. Just because you flip on your TV and see people like Olberman, Maddow, Hannity, Limbaugh explain this in terms of right and left, it doesn't mean that you can't apply a little critical thinking of your own and look at right vs wrong. You've been had by the political punditry- stop now, and get some knowledge. Quit wasting your time with STUPID posts you've cribbed from the latest left-wing blog and use your OWN BRAIN.
Good night and good luck.
 
"On Thursday, May 14, 2009 I was notified that my Dodge franchise, that we purchased, will be taken away from my family on June 9, 2009 without compensation and given to another dealer at no cost to them."

Either property rights have disappeared in the USA, or you signed a contract which allowed the franchise to be taken away without compensation. If the latter then clearly it's your mistake for signing a contract that left you liable to lose your business overnight.

"My new vehicle inventory consists of 125 vehicles with a financed balance of 3 million dollars. This inventory becomes impossible to sell with no factory incentives beyond June 9, 2009. Without the Dodge franchise we can no longer sell a new Dodge as "new," nor will we be able to do any warranty service work. Additionally, my Dodge parts inventory, (approximately $300,000.) is virtually worthless without the ability to perform warranty service. There is no offer from Chrysler to buy back the vehicles or parts inventory."

Your mistake was to carry large inventory reliant on the solvency of a company that for at least a year was clearly at significant risk of bankruptcy.

"Our facility was recently totally renovated at Chrysler's insistence, incurring a multi-million dollar debt in the form of a mortgage at Sun Trust Bank."

Debt is risky, don't borrow what you aren't sure you can repay unless you're willing to take the risk if it goes wrong.

"HOW IN THE UNITED STATES OF AMERICA CAN THIS HAPPEN?"

Signing dumb contracts, not paying attention to obvious business risks, and greedily speculating using debt without being willing to take the downside if you mess up.

"THIS IS A PRIVATE BUSINESS NOT A GOVERNMENT ENTITY"

Take it to court and protect what rights you have under your dealership/franchise contract. Imaginary or non-existent rights are not protected under the law.

"This is beyond imagination!"

Hardly. Chrysler bankruptcy has been on the cards for months if not 1-2 years.

"My business is being stolen from me through NO FAULT OF OUR OWN. We did NOTHING wrong."

Poor risk management, heavy debt load in the middle of a severe recession, a weak contract are all the dealer's responsibility to manage. As a businessman, the cost of poor management is liquidation of the business.

"This atrocity will most likely force my family into bankruptcy."

Don't secure business debt with personal/family guarantees unless you are willing to risk personal bankruptcy in return for the upside of millionaire status when it goes well.

"This will also cause our 50+ employees to be unemployed. How will they provide for their families"

By relying on cash savings (min 6 months, ideally 1-2 years is prudent), short-term debt, asset liquidation, any welfare programs available, and looking for new employment. In other words, the same as anyone who has ever got fired or lost their job since the beginning of time.

"HOW CAN THIS HAPPEN IN A FREE MARKET ECONOMY IN THE UNITED STATES OF AMERICA?"

By your manufacturer being run poorly. Companies sometimes go bust if poorly managed.

"I beseech your help, and look forward to your reply."

In future, learn to observe and manage business critical risks, pay attention to the financial press, trade press, the health of your industry, economic forecasts & prospects etc. Pay attention to the financial security and reputation of your suppliers. Keep debt as low and as long-term as possible, and do not secure business debt with personal guarantees. Do not sign contracts that give you minimal rights or have the clear risk of your business becoming unviable overnight. And lastly, take responsibility and don't whine if you fail to do any of the above and fail as a result. Reviewing your decisions to see what mistakes you made and could have avoided is a more productive and honourable response than saying woe is me.
 
Quote from ByLoSellHi:

Bankruptcy protection allows way to much jockeying and game playing.

This is especially the case where businesses know, well in advance, that they will be definitely be filing, but mislead suppliers and others.

There are so many small, family owned auto parts' suppliers that will either lose money for the year or go belly up because they either won't get paid or will get paid 10 cents on the dollar from Chrysler, for parts already delivered, while the UAW gets full protection.
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I agree. But someone unjustly denied their legal rights can take it to court and sue, right?
 
Cutten, thanks for injecting some sanity into this thread. Speaking of which, this week's economist had an interesting article on this issue. It appears that auto dealers have a hugely powerful lobby and it's actually very difficult for the company to shut down dealers. They've wanted to do it for years but were unable to do so. Chapter 11 gave them special provisions that allowed them to override various state laws and clean up their network.

(None of this have anything to do with the whole obama fiasco. as a fixed income pm, I am appalled by this administration. That being said, this issue is incidental to the bigger problem)

Quote from Cutten:

Exactly.

It helps to read and fully understand contracts before signing them.
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Quote from Shreddog:

I like how you say there was no methodology in the closing of dealerships while complaining that the plan for closing dealerships wasn't published. So you don't know the methodology used, you don't know the details of any given dealership, therefore you don't like the plan you don't know anything about beyond that some dealers are complaining about how they were treated.
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Let me get this straight; you think Chrysler's been so poorly run for so long that they should be liquidated. Yet, you're giving them the benefit of the doubt that this same group of incompetents is going to put together an objective methodology?

Right...
 
Quote from jprad:

Let me get this straight; you think Chrysler's been so poorly run for so long that they should be liquidated. Yet, you're giving them the benefit of the doubt that this same group of incompetents is going to put together an objective methodology?

Right...
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No I am saying I have no idea what their methodology is and neither do you. No benefit of the doubt was given.
 
Buddy, judging from this post and your posts in other threads, you have a real issue when it comes to being able to draw logical conclusions.

Yes, the management is bad. It's one of the major factors leading to the company's failure (militant unions and a background of recession didn't help either). But just because they sucked at one thing doesn't imply that they can't do anything. To wit, by your logic, because they were bad managers, they must be bad at everything - including eating, running, taking tests, etc, right?

Look, it's been pointed out that there has been a plan to cut down dealerships for years. Legal and legislative obstacles made it very difficult to do. Now they get the chance, they did it.

I, like cutten, will give them the benefit of the doubt that they probably weren't throwing darts on the map, especially over the opinion of an ill-informed, ill-educated, and generally ignorant internet troll such as yourself.

Quote from jprad:

Let me get this straight; you think Chrysler's been so poorly run for so long that they should be liquidated. Yet, you're giving them the benefit of the doubt that this same group of incompetents is going to put together an objective methodology?

Right...
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Quote from Cutten:

I agree. But someone unjustly denied their legal rights can take it to court and sue, right?
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In most franchisor-franchisee agreements, and in fact, in most COMMERCIAL CONTRACTS of any kind today, there are BINDING ARBITRATION clauses.

This is so because of the incredibly high costs associated with litigation.

In arbitration, usually a three attorney panel (attorneys who meet the specifications of the American Arbitration Association) hear cases in about 1/6th the time it would typically take a court to hear the case (especially if a jury is involved), and the pre-trial work and time spent is cut down exponentially, as well.

I rarely see any commercial agreements/contracts of any degree of complexity that don't contain binding arbitration agreements anymore.
 
Quote from Covert:

I picked this quote, but there were many to chose from- you need to educate yourself. This isn't a political issue, it's a LEGAL one. The fact that bondholders keep their place in line is related to the LAW not to who occupies the White House. Bondholders in the Chrysler case got ass-raped.
As for the dealerships, why did these select dealers have to be shut down? Nobody can really answer that question. What business is it of the Fed Government to decide who stays in business and who doesn't. If this gentleman was paying his bills, meeting payroll, paying his taxes, who's he hurting?, Certainly not the taxpayer. If he's not able to stay in business, guess what- there are already WELL-DEFINED avenues for him to go out of business, and the govt doesn't have to have ANYTHING to do with it.
This has nothing do do with any political ideology, but from reading what you're writing, I'm guessing that you'll never be able to see that. Just because you flip on your TV and see people like Olberman, Maddow, Hannity, Limbaugh explain this in terms of right and left, it doesn't mean that you can't apply a little critical thinking of your own and look at right vs wrong. You've been had by the political punditry- stop now, and get some knowledge. Quit wasting your time with STUPID posts you've cribbed from the latest left-wing blog and use your OWN BRAIN.
Good night and good luck.
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Well, I don't listen/watch any of the above. Mostly I read the WSJ. You are incredibly naive to not include politics as part of the equation. And I'd argue you're the one that's been had by looking at this as black and white, right and wrong. There are few innocent parties in any of this. Last I saw, in that left wing blog the WSJ, there were still court challenges. It isn't a done deal and our court system still exists. So until then, I see this all as gamesmanship. I won't be surprised to see the terms of any of this bankruptcy change. If it were a done deal, the creditors wouldn't still be squawking and getting people like you all riled up.
 
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