Automotive News - December 1, 2008 - (Page 51) DECEMBER 1, 2008 • 51 continued from previous page the second-largest fine ever imposed on a Florida dealership. Arizona fined the Scottsdale store $225,000 for a similar offense. When the Heard stores went out of business, the Georgia Governor’s Office of Consumer Affairs was seeking more than $50 million in penalties for misleading advertising, forgery and misrepresenting both the value of vehicles and customers’ incomes. HECKER Hyundai star dealer has closed his stores continued from Page 3 Sullied spot deliveries The stores also alienated customers through their use of spot delivery — giving customers vehicles “on the spot” and then trying to arrange consumer financing. Customers sometimes got calls weeks later from dealers, saying financing had fallen through. The dealer might then demand payment for mileage on the new vehicle or renegotiate a higher interest rate on the loan. Often, dealers had already sold customers’ trade-in vehicles. In its last days, one store in Las Vegas recalled a quarter of its spot deliveries, another former manager said, speaking anonymously because he is looking for a job. “People would be driving cars for a month, and they’d call them and say, ‘Come on and bring the car back in,’ ” the manager said. Now that Heard’s empire is dead, selling the dealerships is proving difficult. On Oct. 8, Andrew Parkin, CEO of Global Marketing Enterprises, told Automotive News that he had potential buyers lined up before the bankruptcy declaration for 10 of the 14 dealerships. But potential purchasers so far are bidding on only seven of the stores. Since the dealerships shut down on Sept. 24, the nation’s economy has worsened, shaking consumer confidence and triggering a cash-flow crisis at General Motors. Dealers are struggling to get financing for vehicle inventories, and loans are drying up for subprime customers. All those factors plus Heard’s bankruptcy have scared away some potential buyers, Parkin said. “Denny was a good operator for us, but it was a matter of timing,” said Dave Zuchowski, Hyundai Motor America’s sales chief. “We couldn’t prevent Chrysler from moving in. It was too late for us to go in and floorplan our stores.” Hecker operated the top-selling Hyundai store in Minnesota, with sales of about 1,000 new vehicles annually. Today that store in Roseville is shuttered — along with dealerships representing Chrysler, Dodge, Jeep, Ford, Lincoln, Mercury, Kia, Suzuki and Mitsubishi. According to a Hecker statement, the group sold Dodge, Hyundai and Volkswagen stores to private investors. Zuchowski said that of the six Hyundai stores Hecker operated, three were financed by Chrysler, two by Hyundai Motor Finance Co. and one by U.S. Bank. He said two of the three Chrysler-financed stores are now closed and one has been sold. “It’s business as usual at the other three stores,” Zuchowski said. “But Denny’s problem is part of a larger situation. It’s not just Hyundai, but every manufacturer.” Austin said seven dealerships remain open: three Hyundai stores, two Toyota, one Chevrolet and one Cadillac-Pontiac-GMC dealership. Hecker still has Advantage Rent A Car, which had been stocked mainly with Chrysler, Dodge and Jeep vehicles. Austin would not give either sales volume or revenue numbers. Austin said it’s unlikely that Hecker will reopen the closed stores, and there’s no guarantee he will keep the other franchises and the rental-car and fleet businesses. Hyundai’s Dave Zuchowski: “We couldn’t prevent Chrysler from moving in. It was too late for us to go in and floorplan.” Some of Hecker’s employees say they saw trouble coming. ‘Like guarding’ “Chrysler came a month and a half ago,” said an employee at the Monticello Ford store who asked not to be identified. “They were like guarding it. They froze our bank accounts the second week of October. “We all knew something was going on,” she said. “We were hoping they were restructuring. We had no idea they were closing. We found out about it on the Saturday (Nov. 22) news like every- body else.” All together, 400 Hecker group employees lost their jobs. Employee sources say that on Nov. 10, Ford removed 21 new vehicles from the Monticello store — after Chrysler had cut off Hecker’s credit and then informed all manufacturers that it had done so. Ford zone manager Chad D’Arcy declined to comment. Sunburg, who worked at the Ford store for nearly seven years, said the dealership was closed without warning to the 85 employees. He said several customer cars were still in the service bay. “He just locked it up, locked everybody out,” Sunburg said. “There was no warning, not even to help our customers get their vehicles out of there.” Austin said the Hecker group has taken steps to service customers’ cars, and he said the process is going smoothly: “I haven’t heard of any glitches there.” c FALLOUT Dealer lacks cash to finish building continued from Page 4 NADA Lifeline NADA officials recommend that dealers facing financial difficulties seek counseling on the group’s Lifeline hotline. To set up an appointment, call 1-888-6725147 or go to www.nada.org/lifeline. The free service offers an analysis of dealership operations covering Frozen capital Old inventory Cash flow Capitalization concerns Absorption Expense reduction Accounts receivable Internal processes Warranty administration Other financial or operational issues rating so you have good credit. Any solutions would require good credit.” And she encourages dealers to not give up. “If they call the Lifeline, the professionals might have a solution,” Sykora says. “I’d hate to dash their hopes and say just fold up.” Todd still has some fight in her and insists: “I’ve never been the kind of person to feel sorry for myself. I want to be able to do this on my own. Ford is not the bad guy. It’s just a combination of difficulties.” c tory and can’t order any more new ones. Ford Credit declined to comment on Todd’s situation. “As a policy matter, we do try to work with dealers,” says Meredith Libby, a Ford Credit spokeswoman. “We all want dealers to be successful, and they are our business partners.” MERY DONALD Crumbling building To compound matters, in the fall of 2007, Todd had taken the working capital she had and all of her savings to start building a store. She had planned the project for six years. “I’m in an 80-year-old building,” Todd says. “We bought a piece of property across town that we knew would have better exposure. We had just outgrown this building. The service (area) was too small, the concrete is crumbling and cracking. “We’ve maintained it, but it’s time to be in a building that has proper heating and so forth. Being inefficient in service has really held us back.” But when the population boomed in nearby Bozeman, the cost of supplies and building materials skyrocketed. Todd ran out of money faster Donna Todd in front of her half-finished store: “Ford is not the bad guy.” than she had planned. The store is half built now, but she can’t finish it without more money. “Just everything was working against me,” Todd says. close by year end. Factoring in new dealership startups, the year-end net decrease in stores will be around 700 to 750. Typically, 100 to 200 dealers close their doors each year, Sykora says. The last time net closures were this high was during the recession of the early 1990s. The acceleration of dealers leaving the industry is one reason that NADA has escalated its push for dealers to use its free and confidential Lifeline hotline. The hotline provides professional counselors to help dealers avoid pitfalls or resolve problems before it’s too late, says Sykora. She offers one important piece of advice to dealers: “Protect your credit NADA Lifeline Now Todd seeks private investors for financial help in completing construction on her store and trying to get a new floorplan. Her problems are not uncommon. By the end of October, the most recent period for which figures were available, 667 U.S. dealers had gone out of business, says Annette Sykora, chairman of the National Automobile Dealers Association. NADA estimates that about 900 dealerships will Starting over “The market collapsed literally overnight. We just could not move fast enough to close the deals,” Parkin said. “Once these stores went dark, it creates a much different situation for the buyer. You know you’re starting over.” But starting fresh is the way bidders and buyers intend to make the stores successful. Having the stores closed for a few weeks will help tell the community that business practices will change, said Texas dealer Tom Durant, who is buying Heard’s store outside Tampa, Fla. “I think, because the reputation was so bad, it’s not a terrible deal that the store had to shut down for a few days so that the customers understand it’s a totally new group of people coming in,” he said. And some bidders say they are planning low-overhead stores that can operate effectively in the current weak market. In effect, Heard’s bigger-is-better philosophy is dead. “I have no intention of overdoing it initially. We have an opportunity to go slow,” Jones said. “There may be a portion of this real estate we may not use. There may be buildings we may not open. But we are going to rightsize this store with the market.” c TRANSPLANT Kia will build small car in Georgia plant continued from Page 3 auto plant under construction in West Point, Ga., that will yield 300,000 vehicles annually starting in late 2009. This year, Kia revealed that it had abandoned the idea of producing a pickup at the plant and instead will create a new fuel-efficient small car there that might be shared with Hyundai. Small cars are the weakest link in the Detroit 3’s lineups. Each new auto plant has received sizable government support through state and local incentives, paying for such things as road improvements and worker training. Mississippi has promised Toyota $294 million in aid. Tennessee has arranged $577 million for the Volkswagen plant, an http://www.nada.org/lifeline
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