Seeking to avert the loss of about 140 Chrysler Group dealerships, GMAC Financial Services is working with the stores to approve their wholesale financing.
GMAC, which has approved floorplanning for the vast majority of Chrysler dealerships, said it is willing to work with the rest beyond the deadline, which was Saturday, Nov. 21.
"While we can't keep dealers on interim financing forever, we will continue to work on an individual basis with the dealers who have a clear endgame to reach post-interim financing, and we do not have any hard deadlines in place," said Tony Sapienza, a GMAC spokesman.
The dealerships in question are caught in financial turmoil that resulted from the decision by the Obama administration's auto task force to drop Chrysler Financial as Chrysler's captive finance arm during the automaker's bankruptcy proceedings. GMAC was chosen as the replacement.
To ease the transfer to GMAC, on May 21 the U.S. Treasury Department agreed to guarantee GMAC loans to Chrysler dealerships for six months. That guarantee ended Nov. 21.
After being appointed to take over Chrysler's loan portfolio, GMAC went into overdrive to review the creditworthiness of the Chrysler dealerships. As of Nov. 5, GMAC had approved 1,247 of the 1,474 dealerships that had applied. But 84 dealerships were in final negotiations with GMAC; 58 had received conditional approval, and 85 had been turned down.
The main sticking point is real estate loans. And a number of Chrysler's largest dealerships are stuck.
At Chrysler's urging, many large dealerships had borrowed heavily from Chrysler Financial to expand and improve the stores when the commercial real estate market was flying high.
But now, their properties are worth less than the amount they owe Chrysler Financial. And Chrysler Financial will not give up its security in those loans until the dealerships pay them off.
Of the 58 dealerships that received conditional approval, 41 had "problematic real estate or working capital loans currently with Chrysler Financial," according to a GMAC statement.
Until Chrysler Financial releases its security on the loans, the dealerships can't get new floorplan financing with GMAC or any other lender.
In effect, that means dealerships must get GMAC or some other lender to assume not only the floorplan loans but also the real estate and capital loans. With credit markets still tight and real estate values drastically reduced, that can be difficult.
Chrysler Financial is planning to wind down its Chrysler loan portfolio by 2011.
Meanwhile, Kathy Graham, a spokeswoman for Chrysler Group, said 10 to 20 percent of the dealerships that GMAC had turned down had gotten loans from other sources.
"We're still optimistic there's going to be a solution for all the dealers that haven't transferred to permanent financing yet," she said.