EDITOR'S NOTE: An earlier version of this story incorrectly reported that Chrysler's bankruptcy filing put the captive in default of its agreements with creditors.
Chrysler Financial has frozen the cash management accounts of Chrysler dealers.
The move denies some dealers access to six figures or more of their own cash, which they deposited against their loans for flooplanning. While many dealers closed their cash management accounts when Chrysler LLC's prospects for bankruptcy snowballed, others maintained them.
As Chrysler Financial is being replaced as Chrysler dealers' main lender by GMAC Financial Services, Chrysler Financial also shut down electronic funds transfer. Chrysler Financial froze the cash management accounts on Thursday, April 30.
In a letter to Chrysler dealers, Chrysler Financial CEO Thomas Gilman said Chrysler's bankruptcy filing jeopardized Chrysler Financial's credit agreements with its lenders. The finance company had to suspend funding of commercial lending to give it time to negotiate with creditors.
Carl Woodward, a Bloomington, Ill., accountant with 40 Chrysler dealers, said he advised these clients last year to withdraw all their money from their cash management accounts.
"Most of them took most of their money out if not all of it," Woodward said. "One dealer had more than $10 million in a cash management account, and he had a floorplan line of $50 million. He did listen to me."
A typical dealer might have $5 million in floorplan and from $500,000 to $1 million in a cash management account, Woodward said.
The freezing of electronic transfers of funds has created uncertainty. Troy Allen, owner of Allen Motors, a Chrysler-Dodge-Jeep store in Derry, N.H., said that if he goes to an auction and buys a used car, he will have to write a check instead of transferring electronically. Said Allen: "Until I have GMAC, I'm not going to use Chrysler Financial for anything. I can't use GMAC now."
Bradford Wernle contributed to this report