Dangerous World

As dealers, you now are facing the greatest threat to your business that you have ever seen — the increasing unavailability of floor plan financing.

It is a world in which your finance firm might be your worst enemy. Forget about the state-franchise laws protecting you. It's a new world today.

Some of you who have had decades-long partnerships with firms such as GMAC or Chrysler Financial are now finding your businesses being ripped from your hands because of their actions.

It's almost a no-win situation. Any move you make regarding inventory can result in the banks poring over your books, and if they don't like what they see, no matter how small the alleged “infraction,” they can force you to close.

Many dealers are getting “pressure” from GMAC and Chrysler Financial to manage inventory better. If you're heavy on inventory and you floorplan with those firms, you're probably not enjoying life right now.

Other dealers are debating whether to turn away inventory they've already ordered in order to protect themselves. Guess what folks — that probably won't help. Turn inventory down and you can expect close scrutiny of your books by your finance firm to see if there are any problems. Take the inventory and you may still be in a tough spot.

Chrysler right now is forcing dealers to take more inventory (remember 2006?). The dealers are balking, wondering if they comply with Chrysler, will Chrysler Financial raise interest rates next month, or worse, yank the financing? Chrysler isn't going to go to bat for you — assuming it still exists in a month. Chrysler Financial is going to do what's good for Chrysler Financial — and Cerberus Management. And that's not necessarily what's best for Chrysler or its dealers.

And if you think a long-term partnership with GMAC is going to save you, guess again.

Dealers tell me independent banks are cracking down also. If you're an import dealer, you're not safe either. Right now, Mercedes are piling up at the ports in Long Island while the ports in Southern California are having trouble finding places to stack Toyota and Lexus vehicles.

The automotive world suddenly has become a place where it's every man for himself. Dealers who were in Washington D.C. lobbying Congress on behalf of the Detroit Three did so wondering if the auto makers will turn on them in the future.

Think they care about you? When NADA Chairman Annette Sykora testified before Congress, she first sat through hours of testimony by and questions for Bob Nardelli, Rick Wagoner and Alan Mullaly. People there tell me that when they finished, the three left without leaving even one staffer to be there for Sykora's testimony on their behalf.

What kind of message does that send?

The fact is, you have few friends today. It's important to know your options before the bank comes calling. It might have been unthinkable a few months ago, but now attorneys tell me bankruptcy might be your best option if you're engaged in a dispute with a lender. Whatever you do, don't allow the bank to start pulling inventory off your lot. The law might be on your side.

Even if your business is doing well, it's probably a good idea to sit down with an attorney to gameplan some worst-case scenarios. Doing so might help save your business.