Posted on 12/17/2008 2:31:26 PM PST by TenthAmendmentChampion
DETROIT (Reuters) - Chrysler which has over 100,000 US employees is closing it's plants for at least one month as the company does it's best to save money and sell off existing stock. Earlier in the day Chrysler LLC's finance arm has told dealers it may temporarily stop loans used by dealers to stock vehicles because the retailers pulled money from a fund that helps finance them.
Chrysler Financial Chief Executive Tom Gilman sent letters to dealers, dated Dec. 12, that asked them to refrain from withdrawing large amounts from a "cash management account" used to finance the loans, a source familiar with the letter said.
Withdrawals from the fund, which have totaled more than $1.5 billion since July, have caused a drain on Chrysler's resources and could limit the company's ability to offer financing to dealers to buy vehicles, according to the letter.
Chrysler Financial said in a statement that it finances 75 percent of all vehicles shipped to U.S. dealers and continues to support its dealer network with "uninterrupted" wholesale financing. The letter said about $60 million a day is being withdrawn from the account, which is "well above our historical daily advances."
Chrysler dealers were paid a bonus if they kept money in the account.
Talk about potential bankruptcy at Chrysler, which is seeking federal loans to survive through March, has spooked dealers, who withdrew heavily from the account in the past few months.
Chrysler has asked dealers to only withdraw "what is absolutely necessary" from the fund, according to the letter.
Chrysler, which has seen sales fall 28 percent so far this year, is also facing pressure from some suppliers who were insisting on being paid in advance for goods.
It’s undoubtedly Canadian, eh? Silly oze head....
What a concept!
Actually buying things when you can AFFORD THEM, and not getting in over your head, or living beyond your means.
We've always done it that way; but that's just our old-fashioned mentality, I guess.
Luckily, our kids learned that from us, and don't have credit-debt up the wazzoo, or live beyond their means, too.
As for the Democrat voter-base, well, that's a lesson in irresponsible behavior for sure!
UAW workers are paid 95% of their regular wages through the SUB (Supplementary Unemployment Benefit). This basically supplements the state unemployment benefit with money from the companies to reach the 95% amount. I don’t know how long it lasts but, it is a contractual obligation and has been so for a long time.The Japanese auto companies have a similar benefit.
Right. They get that $35 an hour pay to go home and enjoy the holidays without having too work for it. Great job. Great bennies. Next time you plop down those thousands for a US automobile, remember whose salaries you are paying.
Floor plan financing means that the manufacturer, or its finance arm, Chrysler Credit, sells new cars to the dealers, on credit. The cars are sent to the dealers "in trust." When the dealer sells a car that it has floor planed financed, it removes the car from trust, turnes it over to the has to buyer, and has to immediately send Chrysler Credit (or GMAC or Ford Motor Credit) cash for the vehicle, or the buyer's promissory note, if the buyer meets certain credit requirements.
Something you usually see when the economy turns bad, is dealerships that get caught "out of trust." Meaning that they have sold vehicles to buyers, but have not forwarded the money to the floor plan financer. It can be a crime to be "out of trust," and it is certainly the sort of thing that can cause the finance company to put a dealership out of business.
I think you saw a bit of that in the movie Fargo. The wormy car dealership executive, William Macey's character, who set up a kidnapping of his own wife, had sold cars, but had not paid the floor plan financer. That was why he was desperate for cash. He had to pay off the very suspicious finance company before they showed up with a fleet of tow trucks and removed the rest of the dealership's inventory.
Sure they do but maybe less overtime.
Chrysler is closing all 30 plants because their vehicle lots are full of unsold and un-shipped cars....and because it will freak out the sheeples and help them with the bailout strategy. The UAW will have a nice 30 day vacation at 95% wages.....
“Does anyone know if the workers get paid anyway?”
Given UAW contacts, I’d be surprised if they did not.
Very plausible. Hmmmm.
“UAW contracts pay double in total wages and benefits what the non-unions pay - is it your contention that is not true?”
The overhead per employee is double, due in large part because the auto companies did not build up their pension funds when times were good as they should have. The only company to have come close to doing so is Chrysler, as far as I know. But yes, the above is my contention. Even the CEO of GM said that pay and benefits to current employees is on par with foreign auto makers and their employees in this country. Don’t confuse total overhead expenses with employee pay and benefits.
I have very little sympathy for private equity firms like Cerebus. They all think they are incredibly smart masters of the universe until there is an economic slowdown.
The ugly truth is globally there are too many cars and trucks being made. I forget the demand numbers but a peak year in America is like 15 million sold while a slow & bad year is 12 million. My guess is we are way below that. The problem is you have Japan, China, Korea as well as European car comapnies plus NA, SA, E Europe, Russia and Australia chruning out probably 30 million cars a year or more. There are too many car companies and cars.
The UAW does not see this. You have to have protectionism to keep em flooding into America which is a horrible “solution.” The weakest die and Chrysler is one of the weakest. The only solution is let em die or get the govt to subsidize them (heavily).
If the wages and expenses get cut they have another decade maybe.
That is not good. We have two Dodge vehicles. The PT Cruiser is really good and the 3/4 ton truck is superb. I hope they stay in business, but maybe another company will buy the truck division.
Yes, I fully understand the fundamentals of floor planning. I used to be in the consumer electronics business and did a lot of it myself. (I knew it was time to bail on the electronics business when I walked into Wal-Mart and they were selling one of my bestselling VCRs for $20 UNDER my wholesale cost.)
What I don’t understand is this cash fund they’re talking about being heavily withdrawn from. It sounds like—I could be way off here—the manufacturer, in addition to shipping cars on floor plan, has also made a fund available from which the dealers can draw “operating cash loans” of some sort?
MM
i understand that.
i’m tired of their cars and especially of their unions.
the unions corrupt city, county, state and national government.
i grew up on a dairy farm. we got nothing compared to what they make, working 12-15, 365.
no vacations. no indoor plumbing until i was 10.
They’re dead. It’s bad enough no one’s making loans. Add to that the specter of bankruptcy, voided warranties, and defunct parts suppliers and it’s not surprising that sales are off the cliff. But the killshot is going to come from the privately-owned, used car market. This is going to erupt in 2009 as households raise cash to pay off debts or offset job losses. Good vehicles are going to be sold dirt cheap and destroy what’s left of the new-car market.
A bailout is absolute madness. The may as well ignite all that cash on a bonfire and invite the public to toast marshmallows.
What about the non-union, management-type folks? Hope they get thru this ok. Or, maybe they can go work for the auto makers down South. They don’t appear to be having these problems.
Stop the bailout, stop it now.
Let the company go under where it belongs.
I think this falls outside the two weeks of vacation employees (at least at GM) take during the summer so the plants can retool.
I wish the article stated which month they’d be taking off...at least it sounds like it’ll be *after* Christmas.
It’ll be interesting to know if they’ll be required to use vacation time, get sub pay or some sort of unemployment...I guess it would depend on the contracts and state laws.
What Layoffs Mean for Small Employers
BusinessWeek | December 16, 2008 | Stacy Perman
Posted on 12/17/2008 1:26:12 PM PST by 2ndDivisionVet
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