Is this what comes from government ownership of the means of production?
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. 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.
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.
HOW IN THE UNITED STATES OF AMERICA CAN THIS HAPPEN?
THIS IS A PRIVATE BUSINESS NOT A GOVERNMENT ENTITY
Beats me, brother. My regrets to your employees.
This whole dealer purge makes no sense to me. I wrote about it over on the Flight Deck earlier today.
OldT6Flyer/
It makes perfect sense if you’re a Communist–or you’re stupid in all ways capitalist economics beyond belief–or both.
Lex was wise indeed to chose the term “Kulak” to head his post.
OldT6Flyer/
Actually, I really should have used the term corporate Fascism, because that’s what it REALLY resembles. But remember, by the time of the fall of the Berlin Wall, Communism had pretty much morphed into Fascism anyway in terms of functional equivalency–which is exactly what Hitler predicted would happen in a newspaper interview he gave in the mid-30s…
And there are those that still say there is no difference between Republicans and Democrats. (Sometimes not much, I agree, but for darn sure on this issue there is. A core American value being skewered by BHO)
Mr. Joseph may be one of the first, though surely not the last to be the beneficiary of Hope & Change.
Lord, I hope that Americans vote for America in 2010, and not Amerika.
Welcome to Socialism and BHO’s Brave New World.
Ron Snyder/
Please, please, pray don’t dignify Obama and his minions with the appelation of the term “socialism.” These actions–however they are are currently being rationalized–are nothing less than full bore Corporate Fascism.
VX, I assure you that in nothing I say do I mean to dignify BHO.
The Democratic Party and its supporters have evolved into Socialists -a skunkweed by any other name type of thing. BHO is at the far end of the scale going into Fascism, though I have a tendency to use real-world examples for my descriptive foci.
In any event, a pig with lipstick is still a pig.
BHO will destroy the America that we have loved for over 200 years if he is allowed to.
BTW, it is also not my intent to demean or insult Democrats who follow the examples of Madison, Adams, Truman, Moynihan, Kennedy (the three good ones that died, not the evil one that still lives).
V/R
How can these happen? – It happens all the time in a free market when the means of production and supply far exceed demand. Large cuts always follow.
And the cuts are far greater if a white knight (in this case, the gov’t.) is not found as a savior.
When far too many souls are hanging onto the same lifeboat, and causing it to sink, some have to be sacrificed so others can be saved. Otherwise they all go down and everyone drowns.
The only smart thing to do is have a captain, be it management, or government if management is unwilling or is incapable, who will decide who drowns so others may live while also bailing the lifeboat financially.
Otherwise, they all drown and we all lose.
Then let those dealers who are going to drown, drown. But if they can tread water, build a raft from some passing flotsome, reinvent themselves in ways to allow survival – let them try.
How exactly is having dealers out there trying to actually sell their product hurting GM or Chrysler?
The line above about having a Captain – an all knowing Captain deciding who lives and who doesn’t is somewhat chilling in that the fist sacrificial lambs in this are independent business people who don’t actually havea thing to do with engineering, manufacturing, or marketing the products whose sales (or more precisely lack of) are at the root of these companie’s problems.
This makes no sense even if you buy into the argument that there are too many dealers for these company’s products. If taht is inded true the market will flush that out based on merit, not favoritism.
Flit, there’s a fine difference between grabbing some passing flotsam to shore up one’s own raft, and grabbing a chunk out of another fully-laden lifeboat.
Deliberately not addressing the “all-knowing and infalible Captain” argument, I don’t trust myself to keep an even strain on that topic.
The short answer is: “It’s not America any more, and the rule of law is gone.”
I don’t know much about auto deal franchise agreements, but this sounds like a breach of contract on the part of Chrysler. Every single one of these dealerships should fight back by filing claims in the Chrysler bankruptcy and asking the court to restrain the transfers. At least this way Chrysler will have to convince a judge that the transfers are necessary rather than just getting carte blanc and those that loose their dealerships can get some compensation when (if) Chrysler reorganizes.
In bankruptcy they can ask the Court to cancel the contracts and they likely will be allowed to do so.
I’m not even sure it has to be about bankruptcy.
My husband has a friend who owns a Harley dealership. He’s been keeping it afloat with his personal cash. He was telling my spouse about an exceedingly high end car dealership that we all know of (think fast, German), that is about to lose their franchase back to the mother company. They’re going to come in, take all his cars and then it’s done. He’ll have nothing but the building and the lot.
If you’d told anyone this was going to happen two years ago, we’d all have laughed. Nobody is laughing now. Just watching…
Don’t forget that many Kulaks destroyed their own property (mainly livestock) or rendered it useless rather than see it become community property.
This is why we have guns and not all lawyers have been banished to the Aleutian gulag they so richly deserve! He has a contract. What are the terms that they used to sever it?
Hey, you can’t have it both ways, Curtis. That’s would be so … unAmercian!
I’m sorry Michelle, that just comes from one of my favorite expressions, “send money, guns and lawyers.”:)
There are no more courthouses in Shemya than there are in Gitmo so I have no problem with people paying to fly out there to “consult” with counsel if they are so inclined since the embodiments of evil can’t get any closer to the courthouse than the 10 Commandments.
I shouldn’t write these things…I worked with some really outstanding JAGS in the Navy. There were very few that were smarter or harder working than them. They can have heated cells in Shemya.
Shemya.
Now there’s a rock! Can we put the GITMO terrorists on Shemya and then close the door?
I’d like to see that!
Subsunk
Poor Mr. Joseph probably needs to get all of his employees out front and ask “who voted for this Bozo?”. Bet at least 40% of the hands would have to be held down. this is a great civics lesson, neh? Car manufacturers first, gun shops just around the next bend?
I refer back to Mr. Jefferson:
“A government big enough to give you everything you want, is big enough to take everything you have.”
I’m not shedding any tears for the auto dealers. They bedded down with government when they wove their oligopolistic distribution scheme into the state codes. Why can’t this guy sell his inventory as new? Same reason I can’t sell a zero-miles Chrysler as new — the very laws that his trade association rammed through state legislatures decades ago. Dudes decided that free-market capitalism, and the open competition that was in it, didn’t suit their tastes.
That’s far more un-American than the bankruptcy laws, a subject included in the very first Article of our Constitution. Having the government assume a banker’s role in the proceedings is a new twist, but even in founding times some very American individuals argued in favor of the federal government serving as a participant in the banking market (A. Hamilton, for example). Without the government-as-DIP-lender Chrysler is a Ch. 7 basket case, in which event this guy — and all the other dealers — go to the end of the line of unsecured creditors and everyone gets nothing.
This isn’t a kulak losing the lands his father’s father tilled. It’s a lesser member of the nomenklatura waking up to find himself being airbrushed out of the picture books. Pigs get fat, hogs get slaughtered. Sometimes the pigs get slaughtered, too.
Tough times for all, harder for some than for others. There’s nothing un-American about that, either.
“SUE THE BAS*ARDS.” And pick your forum carefully.
Signed, SteveC, Esq.
He can pick whatever forum he likes, but the U.S. Bankruptcy Code’s automatic stay provision, together with the Constitution’s supremacy clause, says that he’ll be in the Southern District of New York for as long as it matters…
Venue?
Seriously, Chrysler is BANKRUPT. His franchise isn’t worth anything. Why should Chrysler a company in BANKRUPTCY offer compensation for a worthless franchise. This moron obviously didn’t protect his franchise rights when he signed the franchise agreement (ie have a compensation clause in the contract). Are all Lex’s GOP supporting mates here suddnely arguing that government should protect business people from their own inability to negotiate and operate in their own best interests?
A compensation clause triggered by a bankruptcy filing is just as avoidable as the rest of the contract. He’s not a moron for failing to include one. The only thing moronic about the guy is his squealing “free market” when he either participated in the formation of, or bought into, a government-sponsored cartel.
Diplopius, you right the compensation clause in such a way as to make you a secured creditor. Geez it aint that hard. Even if you can’t negotiate a suitable arrangement for your franchise, we have this thing called insurance. When you know that the company with which you have a commercial agreement is in deep shit (and you know this for a very long time) you hedge your bets. Well at least smart people do.
This guy lost his franchise and and any financial benefit because he is dumb, end of story.
As to his employees, well I’m guessing most are commission based sales staff. Hardly core democratic voters so I’m guessing Obama won’t be losing a lot of sleep.
That obviously should have been “write” not “right”. Need sleep.
Yeah, because being a secured creditor to Chrysler carries a lot of advantages. Just ask all those other secured creditors that just got run over.
I’m not arguing for the government to protect anybody. What I am questioning is how terminating the dealer contracts is going to help Chysler and GM and how, if they had not chosen such action, it would have hurt them? If Chysler had made the argument that it wanted to terminate all its dealer agreements because it wanted to adopt a new dealer model overall I could see some logic in that approach. But I have not read about them wanting to change the terms of their franchise agreements but that they just needed to trim the number. How that is going to help them regain market share, etc defies logic.
I suspect that this move is one that allows the car companies to claim they are making tough choices to avoid taking responsibility for making lousy cars. But that is just an opinion that I can’t back up with facts.
Another perspective is here. Worth thinking about.
http://tigerhawk.blogspot.com/2009/05/little-bit-of-chrysler.html
This is the part that has got me riled up:
“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.”
Note: They are taking away his dealership and GIVING IT TO SOMEONE ELSE with no recompensation!!
That is robbery, pure and simple.
But of course we knew that Obama was into wealth redistribution before the election now didn’t we?
Yak, it is the franchise, not the dealership. Bit of a difference.
Kinda of a difference without distinction.
Kinda, sorta. Yes, he will have a dealership (he is dualed with Isuzu). No, he won’t have a Dodge franchise. And he won’t have the Dodge sales that contribute to fading the overhead that Dodge encouraged him to incur (debt service on facilities, mainly). And he won’t be able to do Chrysler warranty work, and have a way to sell the Chrysler parts they required him to maintain in inventory. And, probably most important, he will have to find a new source for financing — both of his inventory (called floor plan) and of his new and used car sales. Chrysler Financial was almost certainly the provider of both of those services. Local banks HATE floor plan financing (mainly because of a well deserved reputation by dealers in screwing them). And last, he will no longer have access to the franchised dealer-only factory auctions of lease and daily rental return vehicles — a major source of the most desirable used cars.
When the original issue of GM and Chrysler came up in December, I knew the only path that worked was bankruptcy. It cost GM $1B to pay off Olds dealers when they shut it down, and there was no previous discussion of the necessary path of rationalizing the dealer networks to fit the sales. Now, we are Santa Claus to GM, to the tune of $15B — no repayment required, and more to follow. And we are only now getting to the dealer network. Yes, it needs to happen, and there will be suffering. But what I have a problem with is the idea that one creditor group can be shuffled to the front of the line in an asset sale, presumably based on their political clout with the current administration. David Skeel has a great article on this “problem”. He isn’t quite so sanquine about the judge in this case going along. The dealers might get some salve for their wounds — more than the One is promising.
Yak, that was the sentence that absolutely filled me with rage, too. I don’t have the knowledge to argue for or against this, but seems to me there’s a lot of hoo-doo goin’ on.
Welcome to our new, learned contributors. Let me fill in a few holes in your extensive knowledge. My family has been in the retail automotive business for over fifty years. My father was a multi-year director of NADA. I have been around this business, have many dealer friends to this day.
First, Wazza, most of a dealership’s employees aren’t in sales. They are in the service department, in parts, in the body shop, in the office — paying bills, getting registrations filed. Go take a look at Mr. Joseph’s staff — Lex provided the link. There are over fifty, and by my count, only twelve are even tangentially connected to sales.
Now, Diplopius, let’s talk about the franchise laws. Yes — dealers used their political clout to get those laws written. The dealers in Texas, which I am most familiar with, went and hired the best lobbyist in the state. They got the laws that governed the relationship between the dealer and the factory – which, as we have learned, is a disproportionately powerful relationship. The dealer, on one side, is expected to make multi-million dollar investments, employ large numbers of the citizenry, and deliver cars while making the profits that make all of that possible. One of our family’s friends has a cost of $60,000/day to stick the key in the door. It isn’t like a grocery store — they can’t dump Kellogg for Post when Special K stops selling (and for which — most envied by the dealers — they are paid for stocking, as grocers are paid for the best shelf space). It also isn’t like a grocery store, because the grocer doesn’t have to maintain years worth of inventory of repair parts, which he can only buy from a single supplier. And finally, the most recent development, Kellogg’s doesn’t tell the grocer to remodel his store to look like every other store that sells Kellogg’s.
The problem in this whole mess, is that we took the bankruptcy laws, and based on political clout, moved one unsecured creditor to the front of the line. Now I am obviously over in your world, and will defer to your knowledge. But to this son of a simple car peddler, that seems to bode ill for the future. Time will tell.
Like my dad’s mentor in the car business said early in his career, “Boys, if you wake up and think the factory, or the bank, is on your side, then go ahead and put the gun in your mouth because your thinking is pretty screwed up.” Another guy on the floor with him went on to own scores of dealerships, a major sports franchise, and endow one of the highest ranked schools of business in the country. Must have been good advice.
In my opinion Scott identifies the key element in all of this.
“The problem in this whole mess, is that we took the bankruptcy laws, and based on political clout, moved one unsecured creditor to the front of the line.”
It pretty much says it all. Obama and his administration, moved the UAW to the head of the line and basically gave them Chrysler.
I have to ask two questions. First. How many of the people who’s pictures are on that website, voted for Obama? For the second, I’ll quote Jim Quinn, a Pittsburgh radio talkshow host. “How’s that Obama thing working out for you so far?”
I’m here to critique the critics, not offer solutions.
I don’t like the UAW/VEBA’s treatment in BK, either. But he who pays the piper calls the tune, and there’s nothing at all unusual about the DIP lender picking winners and losers among the unsecured/equity stakeholders. Without Treasury involvement in this BK it’s a liqudation and our dealer friends still won’t have their dealerships. Only more company in their misery. Why the UAW has its influence in Treasury, and the desirability of that outcome, is beyond the scope of my comments.
NADA’s franchise laws addressed the relationship between the dealer and the manufacturer, yes, but also between both of those parties and the car buying public. Guess who didn’t have a lobbyist at that table?
Same folks who vote with their cash (or credit)–and we see what they’ve thought of the manufacturers and dealers over the past three decades. The manufacturers and the dealers first played the patriotism card to ask us to buy inferior product through a cocked up distribution scheme. Now a subset of them are whining that the loss of their governmentally regulated slice of the market is un-American.
Doesn’t wash.
To other commentators: SDNY Bkruptcy is proper venue. Securing a breakup fee might not be so easy to write into a deal, given the public policy in favor of access to bankruptcy. Insurance: great idea, a bunch of companies were selling all sorts of inexpensive insurance products against credit default. See if you can find any still in business…
OK, first — nothing at all unusual about the DIP lender picking winners… One thing when it is a financial institution, quite another thing when it is an elected government. As I said earlier, doesn’t bode well for the future. Also, as Skeel points out, sorta flies in the face of “no insider trading.”
Second — and the big one — you obviously have a woodie over not being able to buy a car direct from Detroit — or Munich, or Göthenburg, or Kwangju…. Your privilege. Try buying a hamburger direct from McDonalds. Or a sailboat from Hunter. Or a motorcycle from Suzuki. State franchise laws cover multitudes of industries, and they all exist for one reason — it is unreasonable that a dealer has only a unilaterally imposed set of conditions, subject to change, at the sole discretion of the franchisor. It is absolutely absurd to suggest that changes in a dealer agreement can be negotiated by the parties without an effective franchise law because the dealer by himself clearly has no negotiating position.
The car franchise laws weren’t so much to block direct sales as they were to prevent the manufacturers from (a) adding new dealerships without limits and (b) prevent the factories from owning dealerships. Those dealers that you think “played the patriotism card to ask us to buy inferior product” included a fair number of import dealers. Most dealers I know wanted, or had, an import line — they agreed with you. It was the UAW and their captives in Detroit that were beating that drum — so please, point the anger where it belongs.
Just one more group, like the dealers, not quite as favored as the UAW.
Kleenex available at the exits.
Scott, a bit OT, but exactly who was it that kept dealerships closed on Sundays (at least in the states that I have lived in).
Was always an irritation to me that of the two days I had off, the dealerships were only open one of those days. Not many retailers could do that and stay in business.
Many people are getting hosed by BHO; would be interesting to see how many of Mr. Josephs employees voted for him.
Ron — after the “blue” laws met their demise in most places in the mid-80s, a few states passed restriction on weekend opening by dealerships — most often at the behest of the dealers. Texas, for example, has a “consecutive” day law — pick Saturday or Sunday, but not both. The rationale is, opening both days hasn’t shown to increase sales, just increases overhead.
TOTUS seems hell bent on remaking us in Europe’s image. Since almost all retail (including grocers in Germany) is closed on Sunday, wonder if they want to copy that part as well?
This is a tempest in a teakettle. One governmentally favored group is losing out to another. Happens every day, has happened since the first Washington administration. My condolences to the dealers that have lost their businesses — especially Pritchard Dodge, the only domestic dealer I’ve ever done positive business with. But, I don’t view this as a harbinger of doom.