Surviving Chrysler dealer feels credit pain

Alan Claycamp, of Iversen Motors in Santa Maria, Calif., has only one new car on his lot: a 2009 Chrysler 300C demonstrator. He says: "The service department is what's keeping us going."
Iversen Motors in Santa Maria, Calif., made the cut last May when Chrysler dropped 789 dealerships. But co-owner Alan Claycamp sometimes thinks it might have been better if his store had been cut, too.

Claycamp has only one new car on his lot: a red 2009 Chrysler 300C demonstrator. He can't buy new cars because GMAC Financial Services rejected his application for floorplan financing last July, but he acknowledges that he was in financial trouble before the GMAC rejection. About a dozen other banks have since declined to extend him credit.

While Claycamp's financing problems are unusual, his situation does illustrate a significant headache for Chrysler Group: Inadequate credit dogs Chrysler dealerships in some markets, even though GMAC has approved about 94 percent of the 1,474 Chrysler dealerships formerly floorplanned by Chrysler Financial.

The problem is particularly acute along the central coast of California, a region stretching north from the western suburbs of Los Angeles almost to San Jose -- an area that includes Claycamp's store.

Filling Chrysler's loan gap
GMAC Financial Services has approved the vast majority of applications from Chrysler Group dealerships that lost Chrysler Financial as a lender. But some dealerships still report difficulty getting credit.
Total Chrysler Group dealerships: 2,352
Applied for GMAC floorplanning: 1,474
Approved by GMAC: 1,377
Approved, pending loan stipulations: 14
Not approved because they didn't meet GMAC's credit standards: 83
Source: GMAC

Trouble in California

Says Brian Maas, director of government affairs for the California New Car Dealers Association in Sacramento: "When the whole bankruptcy thing happened, Chrysler Financial pulled out and GMAC was supposed to step in, and they've been slow to do that. A lot of these guys are scrambling for financing, and banks aren't willing to do that.

"Unless you're dualed or have another line willing to floor your Chrysler vehicles, you're going to be scrambling. If you don't have access to capital, you can't buy the inventory. And the customer goes in and says you just don't have the choice of vehicles that competing dealers at another line might have."

Chrysler Group had a 5.4 percent market share in California for 2009, according to the dealers association. That compares with 8.9 percent for 2009 nationally. In 2005, Chrysler held a 7.5 percent share of the California market.

Chrysler Group spokeswoman Kathy Graham acknowledges that California is a tough market for the automaker.

"The market share speaks for itself," Graham says. "It's not a market we've given up on. As the company moves forward, we're going to try to continue to increase market share and sales."

Chrysler Group CEO Sergio Marchionne has praised GMAC for working quickly to get many former Chrysler Financial dealerships floorplanned.

As Chrysler entered a government-sponsored bankruptcy last spring, the federal government appointed GMAC Financial Services as Chrysler's finance company. That forced Chrysler dealerships to negotiate new terms with GMAC.

Some dealers who owed large amounts to Chrysler Financial have had trouble getting GMAC to approve them for floorplan lines, so they have had to seek other lenders at a time when credit is tight.

The U.S. Department of Treasury holds a 56 percent stake in GMAC, up from 35.4 percent before a recent infusion of aid.

GMAC declined to speak about the situations of individual dealers.

"We approved the vast majority of Chrysler dealers who applied for wholesale credit lines and are continuing to work with the few remaining dealers who have conditional credit approval," GMAC President Bill Muir said this month.

Scott Reneau, dealer principal of Reneau Chrysler-Dodge in Paso Robles, Calif., can't buy new cars, either. Last week he had four new cars on his lot, all 2009 models. He says talks continue with banks, and he has some hope of success.

Reneau says he is able to order some cars from another dealer and pay cash for them. He says GMAC told him he is undercapitalized. Reneau says he's willing to take a smaller floorplan line but has found GMAC and other banks unreceptive.

"They think of it as more of a cost. They don't want to do [a credit line of] $1 million or $2 million," says Reneau, who used to sell 35 to 45 cars a month.

Reneau is frustrated: "You ask for help, and you're treated like a leper out here. You call banks, and they don't return phone calls."

Seeking another franchise

Claycamp is working hard to get as much revenue as possible from the Iversen Motors service department and boost his store's bottom line so he can make a run at another franchise.

"The service department is what's keeping us going," he says. "I have not heard from Chrysler motors at all. They're not pushing the issue that I'm not buying cars. I'm one of the only guys who can take care of customers as far as the warranty work."

Iversen Motors got into trouble when the economy went downhill in late 2007 and early 2008. Claycamp says his dealership kept buying cars whenever Chrysler asked, and the cars kept piling up as the economy deteriorated.

Iversen had about 200 new cars on the ground when Chrysler Financial suspended the dealership's floorplan line in February 2008.

Although Iversen was on flooring hold, Chrysler didn't reject the dealership during the automaker's bankruptcy. Claycamp says a GMAC official told the dealer that Claycamp couldn't get the $6 million line he was seeking even if he put up $3 million himself.

"It's our belief that GMAC got Chrysler dealers crammed down their throats, and they were going to be very selective," says Claycamp, who does not own his dealership's property. "If you didn't own your own property and have equity and all the collateral they were looking for, you were wasting ink."

Can't get floorplanning

Salem Arnaout owns Simi Valley Chrysler-Jeep-Dodge, situated in a community of about 110,000 on the western edge of metropolitan Los Angeles. He says he can't get floorplanning even though he tried to take advantage of a U.S. Small Business Administration program that would have guaranteed 75 percent of the loan.

"Nobody wants to do Chrysler dealers," Arnaout says.

Jim Crook, owner of Santa Barbara Chrysler-Dodge-Jeep, is more optimistic, although he still doesn't have a floorplan line because he is undercapitalized.

Crook had a $5 million flooring line with Chrysler Financial. He says he now would be willing to have a substantially smaller line, more in line with market realities for Chrysler in California.

Crook bought the dealership in the upscale community three years ago. A month later he learned DaimlerChrysler AG was putting Chrysler up for sale.

"There are a lot of positive things going on," Crook says. "I was a big boy. I was the one who got involved. Somehow this thing will come out. Sergio [Marchionne] has some great ideas."

You can reach Bradford Wernle at