Car dealer Bill Heard Enterprises files Chapter 11

[Blue_Tires]

BIRMINGHAM, Ala. - The company with the largest chain of Chevrolet dealerships in the country filed for bankruptcy protection against a "perfect storm" of woes including soaring gasoline prices, declining demand for big vehicles and the nationwide credit crunch.

Bill Heard Enterprises Inc., the Georgia-based firm which operated in seven states before it shut down last week, said its 14 dealerships were losing from $2 million to $5 million a month because of a drop in sales coupled with a lack of available credit.

A judge scheduled a hearing Monday on the bankruptcy petition, filed Sunday in federal court in northern Alabama.

http://www.forbes.com/feeds/ap/2008/09/29/ap5486058.html

Heard also owes GMAC $229 million...Seems like he has been playing fast and loose with the lease paperwork

[lapfog_1]

1. Ooops...

How did they get $229M in arrears with GMAC, never sent in the down payment checks?

After purchase, don't most buyers deal directly with GMAC?

Or was this some sort of inventory issue (dealer buys cars to put on the lot and has a deal with GMAC to finance at dealer rates until the car is sold?)

[Hassin Bin Sober]

2. It probably has a lot to do with not paying off GM once the cars are sold.

Most cars on the lot are financed under "floor plan financing" either by the manufacturer, GM in this case, or a bank.

Once the vehicle is sold and the dealer receives the cash, either from the customer directly or the customer's financing source, the dealer has to IMMEDIATELY pay off the invoice amount to GM. A dealer who is in trouble may pocket the cash and not report the sale to GM. The floor plan lender's do monthly inventory spot-checks to verify the cars are still on the lot - the dealer better have a good explanation if the car is gone and not paid off. We used to have to provide locations for individual cars that were off-lot for, say, trim/accessory add-ons and the bank would drive over to confirm.

In the old days, before the EFT became widespread, the banks would give dealers "draft checks" to be cashed by the dealer only after the dealer sold a vehicle and received faxed loan approval from the bank the draft-check was drawn on. The procedure was: sell a car, obtain approval from XYZ bank, cash the draft-check AND THEN deliver a signed/valid finance contract to the bank. Well, shady dealers would cash the draft and then hide or juggle when the bank called looking for the finance contract - this scheme was highlighted in the movie "Fargo" when the sales manager guy was on the phone with GM.

[lapfog_1]

5. Thanks!

that's what I was thinking, but then I figured that GM would never let someone get that deep into their pockets without some of their own auditors checking on things.

I wonder if the people doing the spot-checks were being bribed or something.

If I were GM, I would have LoJack'd every car in the inventory (RFID might work and would be cheaper) and check the inventory every damn day and been on the phone if a car doesn't "check in" at least once every two days.

that's just me... but I would get worried if some dealer had $100M or more of my "money".

[dccrossman]

3. Does this mean I won't have to hear his annoying commercials any longer?

[girl gone mad]

4. Many of these dealerships were just banks in drag.

They made money off of financing loans, not selling cars.

[Hassin Bin Sober]

6. I don't know if I would go THAT far but, yes, the F/I department is a profit center......

They also provide a convenient service for one stop shopping for the buyer. If the buyer does their homework, they can take advantage of pretty good rates from the dealer's financing sources. I always tell friends to shop around on the internets for rate and then have the dealer match it. Any dealer worth their salt will have the very best sources at their fingertips. it beats running around town making appointments, faxing pay-stubs and waiting for checks to get cut.

That said, read everything you sign, keep your hand on your wallets, don't turn your back AND FOR GOD SAKE look out for the CBP!!!!!

[nadinbrzezinski]

7. We got a great deal on our honda five years

ago precisely because we did our homework.. a very good deal

So yes, DO research

[girl gone mad]

10. Thanks for the good information.

I recently read "Of Arrogance and Accords" about the 90s Honda corruption scandal. A lot of shady deals, shakedowns and embezzlement going on. It was an interesting peek into the inner workings and politics of the car business.

[ContinentalOp]

11. I think that the service department is actually the biggest money maker for the dealerships...

in this day and age. I could be wrong but I'm pretty sure I read that somewhere.

[Blue_Tires]

12. that and the used cars section

[CreekDog]

8. I hope this isn't going lead us to a cabin and a wood chipper

;)

[Hassin Bin Sober]

9. LOL. It just might!

[Blue_Tires]

13. a few quick updates:

How current customers will cope:
http://www.orlandosentinel.com/business/orl-smith0308oct03,0,7525125.column

Last employee paychecks worthless
http://www.wrbl.com/index.php/news/article/some-bill-heard-former-employees-last-paychecks-bounce/39325/

Some former employees sue Heard (um...what could they possibly get if they DID win?)
http://www.workforce.com/section/00/article/25/80/15.php