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 Posted: Sat Oct 11, 2008 4:18 am Post subject: no bailouts so far address the real under lying problems in |
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http://www.bloomberg.com/apps/news?pid=20601087&sid=ajhnxeIudX14&refer=home
Capital One Ends Financing of N.Y., N.J. Car Dealers (Correct)
By David Mildenberg and Mike Ramsey
(Corrects percentage increase in expected dealership closures in the
third paragraph.)
Oct. 10 (Bloomberg) -- Capital One Financial Corp., the lender that
raised $200 million last month to cover future losses, will end
financing of auto dealers' inventories in New Jersey and New York by
the end of this month, a spokesman said.
Capital One will keep financing dealers in Louisiana and Texas, where
it also has banking offices, said spokesman Steven Thorpe in an
interview. ``It was a very difficult decision for us to make, but
after weighing various factors we believe it was the right decision,''
he said. McLean, Virginia-based Capital One notified in August about
20 dealers who will be affected.
The decision will put pressure on new-car dealerships with the
National Automobile Dealers Association already expecting as many as
600 to close or combine with other dealers this year. That would be
almost 40 percent higher than last year, according to Paul Taylor, an
economist at NADA.
``It>s a defining moment when Capital One gives up the ghost,'' said
Sheldon Sandler, chief executive officer of Bel Air Partners in
Skillman, New Jersey, which advises the automotive retail industry.
``Banks are seeing the bottom fall out of the dealership business and
they don>t want to be caught sitting there owning a bunch of Chevys,
instead of getting cash.''
Dealers that sell cars from General Motors Corp., Ford Motor Co. and
Chrysler LLC are having the most difficult time receiving financing,
said Sandler. Dealers are paying higher interest rates to get cars on
their lots, shrinking profit margins, he said. JPMorgan Chase & Co.
and Bank of America Corp. remain leaders in providing financing to
auto dealers, he said.
`Captive' Financiers
The banks' commitment to so-called floorplan, or wholesale lending
``has been inconsistent,'' said Brian Johnson, an analyst with
Barclays Capital Inc. in Chicago. ``The pressure comes back to the
captive finance companies to pick up the slack.''
Most floorplan lending comes from captive financing units already.
GMAC, General Motors Corp.'s financing group, provided 77 percent of
such dealer financing in the first half of 2008, said GMAC spokeswoman
Gina Proia.
To contact the reporter on this story: David Mildenberg in Charlotte
at dmildenberg@bloomberg.net.
Last Updated: October 10, 2008 12:42 EDT |
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