California Cities Come to Aid of Dealers

California has become the first state where municipalities have approved loans to dealers ravaged by the slump in new-vehicle sales.

The unprecedented action involves appeals for “bailout” loans from Chrysler LLC dealers in Victorville and Norco, cities with 106,000 and 24,000 populations, respectively, plus a Mazda dealer in Norco.

Victorville is located in the Inland Empire area of Southern California. The city approved a $200,000 credit line to Victorville Motors, a 40-year-old Chrysler-Dodge-Jeep family dealership, after turning down a request for $1 million.

“Car dealers are Victorville's main sales tax revenue source,” says Mayor Rudy Cabriales, who adds that the credit line is secured by the borrower's real estate and other assets, and later could be rolled into a 5% 5-year loan.

The loan helped boost monthly sales “and we're hoping that's a trend,” said co-owner Tim Watts at Victorville Motors.

Also located northeast of Los Angeles, the city of Norco approved Norco Dodge and Norco Mazda credit lines of $500,000 each. The latter lost its Mazda Motors-backed financing.

In nearby Redlands, CA, with a 70,000 population, a dealer group requested a 1-year interest-free loan for nearly $123,000. City Manager Enrique Martinez says he had asked local utilities to include with their bills fliers touting the town's dealerships, so as to keep sales within Redlands.

California's new-vehicle sales tumbled 23% last year to 433,507 units, according to the California New Car Dealers Assn.