Breaking news …. Livonia Chrysler Jeep gained reinstatement through Arbitration to day. Congrats to Colleen McDonald, a terrific auto dealer and David Einstandig, shareholder at Thav, Gross, Steinway & Bennett – on a hard fought victory! See Article in Crains…. and Video on Channel 7 News …
June 11, 2009
You won’t hear me sing, Happy Birthday Mr. President
By Colleen McDonald
In 1999, at age 30, I became president of our family business — Livonia Chrysler Jeep, Century Dodge and Holiday Chevrolet – well known and respected throughout the Metro Detroit community. I was a female entering a “men’s club.” Over the years, our Chrysler dealerships were 5 Star, with outstanding reviews on the manufacturer and dealer levels.
Fall 2008, the housing market crashes and the Financial Crisis takes hold. Banks stop loaning money and sales tumble for all manufacturers. Support, however, for the banking industry, which toppled our economy – is unyielding. The Auto Industry, however, is forced to beg. During this process, Chrysler dealers are virtually forced to purchase more inventory by Chrysler management. We were told, we’re in this together and if we take the inventory the Company will stand by us.
On April 20, 2009, Chrysler files its Chapter 11. Our president states, “I stand with Chrysler’s employees and their families and communities. I stand with Chrysler’s management, its dealers, and its suppliers.” The president explains to us that the only reason why Chrysler had to file bankruptcy was that a limited number of secured lenders refused to comply with the program approved by the major lenders. The president makes it clear that but for these few lenders, the bankruptcy would not have been filed. The following week, those few hold-out secured lenders capitulate and agree to withdraw their objection.
Twenty-four days after the filing, on May 14, 2009, my worst nightmare becomes reality when I learn both of our dealerships are among the 789 dealers to close. Not only terminated, but we are told we will receive no compensation, we must close the business by June 9 and Chrysler will not buy back our inventory. My dealerships are profitable, state of the art, modern and well respected. All of which, along with the lifelong effort of my family, now means nothing. The reality is that I was terminated because I was not “one of the guys.” On May 15, I received another letter informing me that my Chevrolet dealership would be terminated.
I attended the hearing in the Bankruptcy Court last week in New York and testified as to the utter unfairness as to what transpired. Robert Nardelli, Chrysler’s CEO, testified that reduction in dealers was needed due to training, specialty tools and subsidized incentive financing costs. Mr. Nardelli is wrong. The dealers are the ones who pay for the training and specialty tools, and subsidized incentive financing has nothing to do with dealers. I was also shocked to learn that Chrysler and GM, through the bankruptcy process will avoid paying its liability for cars under the lemon laws, as well as personal injury claims. These consumer victims will have no remedy.
I have a question and demand an answer. If, as the president stated on April 20, 2009, the only reason Chrysler filed the bankruptcy was due to those few hold-out lenders and one week into the bankruptcy those “other lenders” capitulated and agreed to the terms … then why did Chrysler have to proceed with the dealer closings under the power of the bankruptcy laws? Once those hold-out banks gave in, the president should have directed the bankruptcy to be dismissed. Chrysler would then have had to negotiate fair and square with the dealerships it wanted to close, and would not have been able to use the bankruptcy laws to shun itself of its legal obligations.
I’m an American. I pay my taxes. My country has used taxpayer money to put me out of business at the whim of Chrysler’s executives with the support of the Treasury. Since when is our government allowed to use taxpayer money to fund private business in such a deplorable manner? What did I do to deserve this fate from my country?
So you can count on two things. I will not sing, “Happy Birthday Mr. President,” and Camelot has not returned.
Colleen McDonald, president of Livonia Jeep Chrysler and Century Dodge with the loyal assistance of her attorneys, David Einstandig and Ken Gross, attorneys with Thav, Gross, Steinway & Bennett, PC, practicing in the Detroit area and co-hosts of The Financial Crisis Talk Center, a radio program that airs weekly at 9 AM on Saturday mornings on WDFN 1130 AM.
Saturday, May 30, 2009
New York — The fate of the newest incarnation of Chrysler, poised to emerge in Metro Detroit, won’t be known until Monday or Tuesday.
It marks an unexpected delay in a bankruptcy process that has surprised many for its quickness.
Closing arguments on the sale of assets of the bankrupt Chrysler LLC to a group headed by Italy’s Fiat Spa continued late Friday with the expectation Judge Arthur Gonzalez would rule immediately and not hold the case over into the weekend. But three days of testimony ended with his announcement he would render his decision Monday at the earliest.
Gonzalez said he will also consider Chrysler’s request to waive the 10-day waiting period to close and said objections should be filed in writing today and will be incorporated into the decision.
Once the sale is approved — as is expected — the Chrysler Group LLC formation will be official.
The ending of the Chrysler asset sale case comes as crosstown rival General Motors Corp. prepares its own bankruptcy filing and finishes its restructuring measures. GM on Friday tentatively reached a deal with Magna International Inc. for its Adam Opel division in Europe and got money saving concessions from the United Auto Workers who approved a contract ratification.
The new Chrysler will have the tools it needs to start operations a month after the U.S. and Canadian governments pushed an insolvent Chrysler to file Chapter 11 in return for billions in debtor-in-possession financing. Already in Auburn Hills, top Fiat executives were meeting with Chrysler officials to get the new company up and running.
“Chrysler did it in seemingly record time,” said analyst Joe Phillippi of AutoTrends Consulting in Short Hills, NJ.
“If it had dragged out as people thought it would in the normal bankruptcy process and without government guarantees for warranties and financing, it would have ended up like Delphi (which has been in bankruptcy for four years),” Phillippi said.
The U.S. government has promised a further $6 billion to the new Chrysler Group that will make Chrysler, Dodge, Jeep and eventually Fiat cars and trucks to be sold around the world.
At least 34 hours of testimony have been heard, thousands of legal documents filed and almost 350 objections made in the case.
When the legal dust settles, it could be a while before workers are called back to make vehicles. Chrysler idled its plants when it filed for Chapter 11 on April 30, but sales remain sluggish industrywide and almost 300,000 unsold Chrysler vehicles remain.
The new automaker, to be run by Fiat CEO Sergio Marchionne, will be smaller than the old Chrysler after restructuring resulted in the shedding of assets, workers and other cutbacks.
That includes the company’s dealer base, too.
Richard Mealey, president of Birmingham Chrysler Jeep in Troy, and Colleen McDonald, who owns Livonia Chrysler Jeep and Century Dodge in Taylor, are among the 789 dealers whose franchise deals will be terminated June 9. They took the stand Friday to protest the asset sale.
“I feel like I’ve been raped and left for dead,” McDonald told the court.
Metro Detroit dealership owner Colleen McDonald, with her attorney David Einstandig, testified Friday in U.S. Bankruptcy Court proceedings. (Louis Lanzano / Associated Press)
Mr. President,
I respectfully wish to remind you of a campaign pledge and promise repeatedly made – to the millions of American’s who are underwater in their homes ..and have suffered elimination or severe decline in incomes. The current word is that the Democratic leadership is going to abandon the cram down legislation when Spring term returns. In states such as Michigan, the 80-105% program means nothing, because property values have declined too dramatically – leaving home values too low in ratio to mortgages to qualify.
You are a pragmatic individual – so you understand that the lenders will not negotiate in good faith to reduce principal balances unless there is a leverage point (i.e. a stick). Thus far, virtually no lender has agreed to reduce principal on any mortgage.
I’m an attorney in Metro Detroit. In November, we began a radio show, “The Financial Crisis Talk Center” on Saturday mornings (www.financialcrisistalkcenter.com). The show allows callers to call in and vent; we also include guests and our suggestions to tell people how to whether this storm. For the past 4 months, I have been telling listeners to wait – that the Homeowners Relief Act, which has your support, will pass – and then, and only then, will we be in a position to negotiate meaningful mortgage modifications outside (and if necessary, inside) the bankruptcy process.
What am I to tell them now? Yesterday, I informed them how the political process works. When it wants something – it talks about it and the media then dives into the issue for more buzz. When it wants something to go away – it stops talking about it – so the media has nothing to ask. This is precisely what you are doing with two critical issues that face Michigan and the Midwest. The first, is the Bankruptcy legislation – here you have stopped talking about it – which means you’re abandoning it – and now it is going away.
The second – on the auto front. Before you acknowledged that bankruptcy would decimate the country because – (1) people will not buy cars from a company in bankruptcy because of (a) warranty concerns, and (b) recognition that resale value will be nil; and (2) that 3 million jobs downline are at stake.
Now – the “floated” notion of a 361 Bankruptcy for GM is being talked about – and the solution to put all at ease is that the Government will back the car warranties.
What is silent – and therefore not challenged by the media – is that no one will buy a car due to the resale issue; as well as the 3 million lost jobs.
Bottom line – good people are suffering real hardship in the Midwest. Many of these people broke rank and voted for you – and believe in you. I respectfully submit, however, that you need to follow through on the support y you pledged to them – and keep in mind, from here, the support of the banks, insurance companies and credit card issuers is looking a lot like the trickle down … that doesn’t trickle.
Of course, you are welcome to call in and address these issues as a guest on our show, next Saturday at 9 AM. Our US Congressmen (Thad McCotter and Gary Peters) appear as guests on a regular basis.
Most important – please “talk about the Bankruptcy reform” and make it happen. I recognize the monumental tasks you face – but I, like most of Michigan, believe in you and believe you can make it happen if you remember the people.
PLEASE WRITE PRESIDENT OBAMA AND REQUEST THAT HE RENEW HIS PLEDGE AND SUPPORT FOR THE CRAM DOWN LEGISLATION THAT WILL HELP HOMEOWNERS UNDERWATER IN THEIR HOMES …. YOU CAN REACH HIM AT:
www.whitehouse.gov/CONTACT/
We’re back to Stage 1 with the auto bailout. GM has been told it must gain greater concessions from the bondholders and the UAW within in 60 days or else. Chrysler has been told it has 30 days to cut a deal with Fiat or else. We’re told the banks and AIG are too big to fail. Our country’s largest manufacturing industry, however, is not.
It is apparent that this double standard is not going away. Rather than dwell on the idiocy, maybe we need to point our government in a different direction.
The Obama administration’s auto task force may have no auto experience, but it appears that it lacks business sense as well. The key to getting beyond this crisis is not endless streamlining, plant closings and union concessions. All of the concessions in the world will not cause a turnaround in the industry if sales remain at 60 percent of normal levels. No business can sustain a loss in 40 percent of its sales volume, yet alone a capital-intensive industry such as the auto industry.
The fact is that the industry will burn through the money unless auto sales are stimulated.
To do that, all that is needed is to provide government guarantees to the banks on leases and loans to buy domestic-made vehicles. The interest rates should range from 1 percent on fuel-efficient cars to 4.99 percent on the SUVs.
The federal program has to say to the banks: If you want the guarantee, then you must approve loans for buyers/lessees with FICO scores above 600 (not the ridiculous new requirement of 700 that has killed the market). If the buyer/lessee defaults, then the bank is covered on 90 percent of the loss following repossession and sale of the vehicle.
Government-backed guarantees to the bank are the foundation of the manner in which the Small Business Administration has done business for years in financing new businesses. Implementation of such a program would not be difficult.
How do you get the banks to comply? First, if the government guarantee is in place, then the banks will recognize a good deal and extend the credit. As a backup, the Treasury needs to condition any further Toxic Assets Relief Program funds to the banks so all such extensions of funding constitute a demand loan, which means the Federal Reserve can call the loan at any time and demand repayment. This is precisely how these same banks lend money to businesses.
If the banks don’t start lending money and doing as the Fed sees is in the public interest, then the Fed calls the loan. Either the banks play ball or they are out of the game.
Congress, it is not that complicated. Please, grabbing the microphones to scream about AIG bonuses and complaining about the auto industry of the 1970s. Instead, do something smart for a change.
Ken Gross is managing shareholder at the Metro Detroit law firm of Thav, Gross, Steinway and Bennett and host of “The Financial Crisis Talk Center,” which airs at 9 a.m. Saturdays on WDFN Radio 1130 AM.
I don’t understand the financial wizards. If the Detroit Automakers go down – you might as well extend Lake Michigan to Lake Huron. Congress needs to get real. The key, however, is not just to give the big three money – they will burn through it unless AUTO SALES ARE STIMULATED.
To do that – all that is needed is to provide government guarantees to the Banks on auto loans and leases for the purchase or lease of domestic manufactured vehicles. The interest rates should range from 1% on fuel efficient cars to 4.99% on the SUV gas guzzlers. The Federal Program has to say to the Bank – if you want the guarantee – then you must approve loans for Buyers/Lessees with FICO scores above 600 (not the current ridiculous new requirement of 700 that has killed the market). If the buyer/lessee defaults, then the Bank is covered on 90% of the loss following repossession and sale of the vehicle.
This, coupled with enough money to get the Big 3 through the crises – is a plan that will work. Once auto sales and leases get going – so will our economy and only then will a turnaround occur.
Dave - many thanks and Happy Holidays to you and yours,...December 9, 4:32 am by Ken Gross
Touching commentary...makes me want to go see it. Mitch...December 9, 4:32 am by Dave Smith
