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GM Chysler and Charlotte


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Charlotte fared fairly well in the Chrysler closings though I am not sure this is much positive news. Mayberry Chrysler on Independence was probably the biggest shocker. Metro Chrysler is also going to lose it's franchise but this should not be a surprise as the owner of the dealership was already bankrupt. Last week he was indicted by the authorities for not sending money to the state paid by individuals for taxes and so forth when they purchased their vehicles. This activity was associated with his better known dealership Honda of Lake Norman, which was a brand new facility and now closed. If you bought a Honda there, I feel for you. If you passed it by, then good for you. Unfortunately for the people who got ripped off, I believe the state is demanding they pay the highway use tax which is 3% of the purchase price.

GM is a bit more cagey about what they are going to close. It sounds as if Charlotte's Sonic Automotive (one of CLT's fortune 500s) lost 4 of it's 159 dealerships. Not a big deal for them I guess. I don't know where these are located. The shocker on this one, if true, is that Parks Chevrolet has lost its franchise. Not sure if this hits both their Charlotte and Lake Norman facility. The Lake Norman dealership is a new one that was built to unique standards to support a more progressive city council that once existed. Cissy Parks squawking TV adverts will be gone. One can only hope they got Randy Marion as well for this reason.

GM is complicated. There are also Saturn, Hummer, Saab and Pontiac dealers in CLT that are not counted in this number. More to come as I don't think GM is cutting back enough. They probably need to get rid of Buick and GMC too. Soon all we will have are bankers and CEOs. Maybe good for Charlotte, maybe not.

All in all Chrysler and GM will represent another ~120,000 jobs gone from the US economy. GM says another 1200 dealerships will be axed that are related to Saturn, Pontiac, Hummer, etc. So all in all close to a quarter of a million jobs. So much for the service based economy.

Meanwhile, GMAC will not be able to survive without more bailout money from the US government. It is in pretty bad shape even according to the very bank friendly happy face stress tests. IMO, this was not a good investment by the State of NC.

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It works out something like this.

  • Federal government has now taken ownership of 35% of GMAC.

  • They have given ~$18B to keep GMAC afloat.

  • GMAC management has until some time in June, maybe its the 1st, to come up with a plan to raise another $5B-$6B.

  • In terms of ratios, only AIG has been given more money

  • GMAC's business is basically $35B in outstanding car loans and $25B in outstanding mortgages. Both are very challenged.

  • The car loan business includes the all the leasing activity. One of the issues are that cars were leased assuming much higher residual values than where we are today. It's a time bomb waiting to explode. In other words, GMAC is becoming the owner of a lot of vehicles. And GM and Chrysler vehicles at that.

GMAC does not seem to have a business plan that would lead to a sustainable business. There is no way for it to generate the required capital to cover it's loan business and it basically has nothing else. It's attempt at an online bank, Ally, is being derided.

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