Tight credit puts squeeze on big three auto dealers

WSJ reports the credit crunch squeezing Detroit's Big Three auto makers is now spreading to some of their dealers, adding financial pressure to a group already strained by this year's big drop in auto sales.

The latest and most prominent example is Bill Heard Enterprises, one of the largest Chevrolet dealers in the country, with 2007 sales of $2.1 billion. Earlier this month GMAC stopped doing business with Bill Heard over concerns about financial losses related to the privately owned chain of 14 stores, Bill Heard confirmed through a spokesman.

The weakening credit profiles of GM, Ford Motor and Chrysler and their finance arms are adding a new challenge for dealers. In the past, GMAC, Chrysler Financial and Ford Motor Credit were key elements in how Detroit pumped up vehicle sales. They typically offered dealers easy credit to help them sell as many cars and trucks as possible, even if they gave away some of their margin to do so.

But now that the car makers and their once-lucrative financing units are racking up losses and struggling to raise funds themselves, they are getting tougher on dealers with weak finances. And since GMAC and Chrysler Financial are both controlled by private-equity group Cerberus Capital Management, each is now being run to maximize profits, not auto sales. (GM, F)

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