One of Bill Heard Enterprises major creditors has put a squeeze on the Columbus car dealer.
GMAC, which finances new car inventory for some of Bill Heard's 14 dealerships from Arizona to Florida, has discontinued credit to the company. It could be a crippling blow to the company that recently sold more Chevrolets than any other dealer in the country, an industry consultant said.
Edward Heard, the company's vice president for platform who oversees operations in Texas, Arizona and Las Vegas, was in Detroit Monday meeting with GMAC officials, said Kent Illges, Bill Heard Enterprises Vice President for Business and Customer Relations.
"We have got to work out a financing plan with GMAC or another company," Illges said,
Edward Heard, the son of Chief Executive Officer Bill Heard Jr., was trying to arrange a different financing deal with GMAC, Illges said.
The dealerships are open and continuing to operate, Illges said. Not all of the dealerships have had their financing pulled, Illges said. He did not say which of the 14 were affected.
"There are no plans to close the Columbus Bill Heard dealership," Illges said. "We are looking to sell a couple of the other dealerships around the country so as to diversify into other brands."
A GMAC spokeswoman declined to discuss any action the finance company has taken against Bill Heard Enterprises.
"We don't comment on any actions we take with any particular dealer," GMAC spokeswoman Gina Proia said Friday. "It is GMAC's practice to regularly review credit risks related to wholesale financing and taking action to appropriately mitigate risk."
Bill Heard Jr., 74, was not available for comment Monday.
GMAC supplies the financing for dealers like Bill Heard Enterprises to have a ready inventory of new cars from the factory. It is commonly referred to as a floor plan. As those cars are sold one by one, the dealer pays GMAC back for the floor-plan loan.
GMAC does not supply new car inventory financing for all of Heard's dealerships. A Heard spokesman would not say how many dealerships or which ones are financed by GMAC.
Mark Rikess, a Los Angeles-based consultant and trainer who works with more than 100 automotive dealerships, said losing GMAC financing for Heards floor plans is a critical blow to the business.
"The typical reason for GMAC yanking credit is the store is out of trust," Rikess said.
The company audits dealerships and finds "there are less cars on the lots than there should be," Rikess said, "Which means they are not reporting all of the sales. Many times, they are accumulating GMAC's money to buy used cars or maybe pay off bills."
Large dealers like Bill Heard Enterprises are frequently audited, Rikess said,
In 2007, Bill Heard Enterprises was the 11th largest automotive dealership group in the country down from No. 7 six years ago with $2.144 billion in total revenue.
As the economy has turned south, the U.S. auto industry has been hit hard. Bill Heard Enterprises geared to sell Chevrolets in Georgia, Alabama, Florida, Texas, Tennessee, Nevada and Arizona has taken a serious hit. The company, which Heard's father started as a single Columbus dealership, has put dealerships up for sale. Two in Tennessee, Nashville and Collierville outside Memphis, have sold.
Last month, Bill Heard Jr. said he had some additional dealerships for sale. He declined to say which dealerships, but said he would like to sell "two or three."
As the company is looking to shed dealerships, it has also been downsizing. Bill Heard Enterprises has trimmed 400 employees, down to 2,400 across the country. Bill Heard's Columbus dealership employs 355, while 40 more work in the corporate office. Those numbers are down too, but Heard would not say how much.
One look around Bill Heard's Columbus dealership on Manchester Expressway shows acres of asphalt where new and used cars were parked in years past.
In a rare interview last month, Bill Heard Jr. identified three reasons his company is struggling:
Bill Heard Enterprises didn't react fast enough to the economic downturn.
It is Chevrolet-exclusive.
Banks tightened requirements to grant buyers loans. News of trouble with GMAC financing began Friday. Bill Heard Enterprises was informed of GMAC's decision Thursday, Illges said. Rikess said he would not be surprised to see GMAC and Bill Heard Enterprises work out some sort of arrangement. "If he can't work something out with GMAC and he might be able to because they have a long history he will have to get his money elsewhere," Rikess said. "I would think it is in GMAC's best interest to keep him in business."