Pohanka Chrysler Dodge in the spotlight

A dealership in Leesburg, Va., called Pohanka Chrysler Dodge has become the face of the Chrysler bankruptcy and dealership shutdowns.

Pohanka Chrysler Dodge was featured on “The Today Show” this morning, and people are shocked by what dealer/operator Ray O’Bryhim has to say.

Dealership deadlines

O’Bryhim explained that Pohanka Chrysler Dodge can’t legally sell any merchandise after June 9, when the dealership’s franchise contract with Chrysler ends.

The Pohanka Chrysler Dodge space will remain a car dealership, but it will be a different type. O’Bryhim says the space will become a “used car superstore.” However, the official Pohanka Chrysler Dodge dealership must get rid of more than 100 new cars still on the lot, and that means huge price slashing. Those cars need to move, with as tough as it is to get unsecured loans nowadays, that means discounts of up to 40 percent. Here are some examples from CBS News:

So a car that was listed at $19,575 is going for $14,987, or 20 percent off. A Dodge Nitro originally being sold for $29,170 marked down to $17,510 — or 40 percent off. And a Dodge Caliber with an original sticker price $25, 715 now on sale for $19,034.

High hopes

The owner of Pohanka Chrysler Dodge says the dealership doesn’t plan to make any layoffs, even though the company is held liable for the Chrysler vehicles still on its lot. Chrysler is currently under bankruptcy protection, so it is not required to take any of the vehicles back.

Any vehicles that don’t sell will just be chalked up as a loss for Pohanka Chrysler Dodge. However, with the deep discounts the dealership is offering, it has already managed to sell 20 cars. If sales keep up this way, it’s possible Pohanka Chrysler Dodge will be able to sell all of the new Chrysler vehicles before the June 9 deadline.

One of the lucky ones

With the publicity Pohanka Chrysler Dodge has gotten, it’s likely that the dealership will be successful in moving the necessary merchandise. This line from the company’s web site has been splashed all over the press:

“Chrysler bankruptcy forces liquidation. This is It… Period!. Everything must go regardless of profit. New Chryslers and Dodges for pennies on the dollar, today.”

However, the 788 other Chrysler franchises who will have their agreements severed might not be so lucky. Most won’t be able to “reinvent themselves as used-car superstores.” The majority will simply have to cut their losses and shut down. Longtime family businesses will be no longer and employees will be filling out their online unemployment forms.

Good time to buy a car

Because of the huge number of Chrysler dealerships that are being forced to liquidate their inventory, there is more than likely a dealership close to you that is going through the same process Pohanka Chrysler Dodge is conducting.

So if you are in the market for a car — or even thinking about being in the market for a car — check out the dealerships around you. You might just get a really great deal and be able to help a car dealership out at the same time.

America’s big automakers have all been in serious need of cash advance loans and debt relief for some time now. Overproduction of consumer vehicles that burn through gasoline and take up too much room on the country’s current highway system has been the byproduct of poor planning by top automobile executives. Now the time has come for them to reap what they have sown.

Unfortunately, this means that many honest, hard-working employees are losing their jobs, thanks to the economic corpulence of those who may never have known what it truly means to struggle to survive. This time, there’s no bailout: Chrysler has bankruptcy on their minds. Chapter 11 bankruptcy.

Average taxpayers may get nothing

Following the trail of Chrysler news, Michael de la Merced blogs for the New York Times that the restructuring battle has changed locales, from board rooms to bankruptcy court. Chrysler and the Obama administration did not obtain the consent they needed from secured lenders, so Chrysler is bankrupt.

de la Merced wonders what will happen when it comes to the company’s assets. The government has poured billions into Chrysler and Chrysler Financial, and investors are out there. The taxpayers should have a say in who gets their hands on the company’s assets, but a bankruptcy court will not likely grant this. I say the people should voice their displeasure.

Follow the Chrysler stock symbol

Investors will argue that they have first claim because they’d “see greater recovery in liquidation,” which they contend would yield about 65 cents on the dollar. By contrast, the Treasury’s most recent plan for creditors via Chrysler’s main bank lenders (JPMorgan Chase, Citigroup, Morgan Stanley and Goldman Sachs) would have supposedly delivered only 33 cents on the dollar.

But investors hold “first lien” on Chrysler’s assets, so they’re first on the list to be repair for their investment. They hold a more senior position than the government for Chrysler debt. And since so much of Chrysler is already “on dibs,” the government is likely to provide unsecured debtor-in-possession financing that comes with Chapter 11 bankruptcy.

The government would then be able to enforce their will on investors (by law). If Chrysler can come up with two-thirds of the amount of the debt and a majority of stockholders can agree on reorganization terms to foist that plan upon holdouts. Such a simple majority is much easier to come by that the near unanimous agreement usually needed for out-of-court debt consolidation to work.

Is this surgery a success?

But will the government’s plan succeed? They may not have the majority they need by law. Many of Chrysler’s senior creditors voted against such a plan, as have big banks.

The government is pushing a prearranged bankruptcy plan where a new corporate entity for Chrysler would be formed, containing positive assets. United Auto Workers would hold 55 percent equity through its health-care fund, Fiat would hold up to a 35 percent and the government would the remainder. This agreement would open the door for Chrysler to drop its liabilities and unfavorable contracts easily. The government wants this to happen quickly; it’s what experts have called “surgical bankruptcy.” Time will tell if they get it.

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