The automotive and business sections of newspapers around the world are

filled with the stories of Chrysler’s recent bankruptcy and General

Motors slide into the same abyss.  Both companies are slicing dealer

networks in attempts to match the number of dealers to the volume of

sales. The thinking being that it’s better to have fewer strong dealers

than thousands of weak dealers. Chrysler sent letters to 789 dealers

saying they would be closed in three weeks. One day later 2600 General

Motors dealers received letters saying they would be closed no later

than September of 2010.

That’s the good news, at least for those dealers not affected by the cutbacks. Then there is the bad news.

David Hagan, father of Funny Car rookie driver Matt Hagan, and owner of

the Shelor Auto Group in Christianburg, Va., the largest single point

dealer in Southwest Virginia, explained that not being on the dealer

cut list was a relief, but the actions of Chrysler Financial just one

day later were potentially devastating to even the healthiest of

dealers.

The automotive and business sections of newspapers around the world are filled with the stories of Chrysler’s recent bankruptcy and General Motors slide into the same abyss.  Both companies are slicing dealer networks in attempts to match the number of dealers to the volume of sales. The thinking being that it’s better to have fewer strong dealers than thousands of weak dealers. Chrysler sent letters to 789 dealers saying they would be closed in three weeks. One day later 2600 General Motors dealers received letters saying they would be closed no later than September of 2010.

That’s the good news, at least for those dealers not affected by the cutbacks. Then there is the bad news.

David Hagan, father of Funny Car rookie driver Matt Hagan, and owner of the Shelor Auto Group in Christianburg, Va., the largest single point dealer in Southwest Virginia, explained that not being on the dealer cut list was a relief, but the actions of Chrysler Financial just one day later were potentially devastating to even the healthiest of dealers.

“Twenty five hundred dealers had their wholesale with Chrysler Financial (pulled), not Chrysler Motor company, Chrysler Financial,” said Hagan. “The President spoke the day Chrysler Motor Company went bankrupt and suddenly announced that Chrysler Financial was not viable and would not continue from that moment forward. So, you had 2500 dealers affected immediately.”

To be fair, Chrysler Financial has continued to supply financing to car buyers, despite having unattractive rates. What the company did is shut down their financing to car dealers, who use the financing to keep a fresh, updated inventory on their lots. In the case of Shelor Auto Group, Chrysler Financial was providing the funding not just for Chrysler Motor products, but for all the different manufacturer products on the company’s lots.

The move by Chrysler Financial meant that Shelor Auto Group had a $70 million dollar line of credit wiped out in a single moment in time, effectively meaning that any new or used car that came on the lot from that moment in time would be paid for in cash, immediately. Hagan estimated Shelor Auto Group was moving two to three million dollars worth of new cars each week and another one to one and a half million dollars in used cars. In better times the numbers were much, much bigger.

“The automobile business has been pretty vulnerable since last September,” Hagan explained. “We’ve seen our sales go from about $300 million annually to about $175 million, about 45 percent drop. We sell Chevrolet, Toyota, Chrysler, Plymouth, Dodge, Suburu, Ford, Kia and then we are the largest used car dealer in the state (Virginia). It’s been a very, very tough roller coaster.”

Shelor Auto Group has pared back from 330 to 270 employees during the downturn.

a d v e r t i s e m e n t

Click to visit our sponsor’s website 

Our Jeep dealer in town, he’s been a Jeep dealer since 1979. He just

built a new building for Chrysler a year and a half ago; spent two

million dollars on that building. He found out in three weeks he’s got

a building that is going to be empty, no franchise, all his employees

(will be out of work), they have no obligation to take back parts,

inventory and basically if you owe a thirty thousand dollar a month

payment on your facility you need to figure out a way to do it. 

By the time this article goes up on the internet, Shelor Auto Group should have worked a deal with GMAC for a new line of credit to keep operations moving smoothly. GMAC, with increased government funding, is working feverishly to pick up the best of the best dealers left in the lurch by the termination of Chrysler Financial funding.

Shelor Auto Group will most likely grow larger due to recent events. The local Jeep dealer in Hagan’s area is one who got the death notice from Chrysler. That franchise is headed to Shelor Auto Group. On the General Motors end, Shelor is likely to pick up Cadillac or Buick or both.

Hagan is thankful for his position. He understands the pain of his neighboring Jeep dealer.

“Our Jeep dealer in town, he’s been a Jeep dealer since 1979. He just built a new building for Chrysler a year and a half ago; spent two million dollars on that building. He found out in three weeks he’s got a building that is going to be empty, no franchise, all his employees (will be out of work), they have no obligation to take back parts, inventory and basically if you owe a thirty thousand dollar a month payment on your facility you need to figure out a way to do it.”

Sympathy aside, and Hagan expresses a great deal of sympathy for any auto dealer being closed, the fact is Chrysler has been trying to rid themselves of marginal dealers for quite some time. In bankruptcy, Chrysler is now free to trim back without having to pay dealers to close. General Motors will be able to do the same.

Hagan believes the automobile industry is at or near the bottom. He believes the ‘wait and see’ attitude taken by the buying public is going to result in a huge pent up demand that will break free sometime next year. For now, Hagan and his fellow dealers are licking their wounds, counting their losses, which he estimates will wipe out the growth of the last ten year, securing the financing they need to operate, and looking forward to brighter days. His one concern, access to enough of an inventory to satisfy the demand he is forecasting.

What does all this have to do with drag racing?  Everything if your name is Matt Hagan.

Matt Hagan quickly made a name for himself in the IHRA, attracting the attention of Don Schumacher. Schumacher signed Hagan to drive the Mopar/Oakley Dodge being vacated by Gary Scelzi. As quickly as you can say bad economic times, Chrysler yanked a good portion of their funding from the NHRA. For now, Schumacher and David Hagan are footing the bills.

“Don signed Matt to drive last year in Richmond,” said Hagan. “Two weeks later, we got word that Mopar has withdrawn their funding nationwide, 85 – 90 percent of it. At that point, we had a small sponsor that was going to jump aboard. Yes, we are funding a portion of the program but Don is funding the main portion of it.”

Hagan remembers that his son contacted Schumacher upon learning of the situation with Mopar. He asked ‘how does this affect us?’ and Schumacher responded that he was ’emotionally and contractually obligated and we are going forward’.

The commitment of this car owner and the driver’s father have been rewarded by the stellar rookie performance of Matt Hagan. The team is still actively looking for a major national sponsor. Like the car business, David Hagan believes his son’s lack of sponsorship will be resolved along with the recovery of the economy.