Gregory Williams once thought of General Motors and its captive finance company as his business partners.
Now, the former Chevrolet dealer fears that GMAC Financial Services will take his home, acting on personal guarantees he signed for loans. He blames GM at least in part.
Williams says that after giving up his dealership, Huntington Chevrolet in Huntington Station, N.Y., in May, he still owes GMAC $1.4 million for a 2005 loan he personally guaranteed. He took out the loan to buy out GM’s interest in his store.
Because he also signed a personal guarantee for his inventory loan, the amount due could swell if the $5.8 million in new vehicles and $800,000 in parts Williams surrendered to GMAC fail to bring full value.
Williams says he has no official tally, but last week a GMAC regional representative told him the lender had sold the parts for $40,000 and at least some of the vehicles at a loss.
Williams, 60, says he has no income to pay GMAC and is living off his steadily dwindling savings. All he has left, he says, is his Atlanta home.
"I asked them if they were going to come after my house, and they said they couldn’t promise that they wouldn’t," Williams says.
• Former president of Huntington Chevrolet in Huntington Station, N.Y.
• Graduate of GM’s Minority Dealer Development Program
• Purchased his first store in 1979 and Huntington Chevrolet in 1999
• A 2003 GM Dealer of the Year; former chairman, GM Minority Dealer Advisory Council; former member, GM Northeast Regional Dealer Council; and former member, GMAC Regional Dealer Council
• Resigned his dealership in May after losing inventory loan with GMAC and learning that GM had rejected his store
GM deposited money in the bank account of Williams’ former dealership — compensation for dealerships the automaker rejected as part of its bankruptcy reorganization. But he cannot access it, Williams says. GM has not told him why, he says.
Williams declined to disclose the amount that GM promised him, citing a confidentially agreement with the automaker.
Neither GMAC nor GM would address Williams’ situation specifically.
In an e-mail, GMAC spokesman Mike Stoller said the company "works with its dealers on an individual basis, and each situation has its own circumstances."
GM spokesman John McDonald said the automaker has tried to reduce its dealer network fairly, equitably and with appropriate assistance to help dealers wind down their businesses.
Charlie Ognibene, a Boston lawyer for banks and auto finance companies who is not involved in the case, says lenders typically require personal guarantees from private business owners, including dealers. A guarantee enables a lender to seize a dealer’s cash and other personal assets if the dealer defaults on the loan.
"If things go bad, the lender wants to make sure that the business owner has an incentive to make the business work," Ognibene says.
In 1978, Williams entered GM’s minority training program. The New Orleans native owned three other dealerships before purchasing Huntington Chevrolet on Long Island, N.Y., in 1999 for $3.3 million. He used $500,000 of his own money; GM’s Motors Holding unit financed the rest.
Dealer of the Year
Williams says the Chevy dealership made money. He was paid a salary and bonus, and his share of the quarterly profits was used to buy out Motors Holding’s stake. Over the years, that added up to more than $1.5 million, he says.
The store’s new-vehicle sales peaked at 1,608 units in 2003, earning Williams a GM Dealer of the Year award — one of only 110 dealers to receive the honor that year, according to a congratulatory letter from Rick Wagoner, then GM’s CEO.
In 2005, Williams says, GM urged him to buy out Motors Holding’s remaining interest in his store because GM needed to raise money. So he borrowed $2.5 million from GMAC, then a GM unit, to do so. He signed personal guarantees for that loan and his floorplan loan.
Sales fell as the economy slid into recession. In 2008, the dealership sold 867 new cars and trucks. Still, among the 19 Chevrolet stores in its zone, Huntington Chevrolet was No. 3 in sales and No. 1 in customer satisfaction, Williams says.
Then in November 2008, Williams received a letter from GMAC saying he needed to invest $1.5 million in his dealership or risk losing his floorplan loan, he says. Williams says he told GMAC he didn’t have the money.
Out of trust — and options
Late last year, GM, suffering cash-flow problems, delayed incentive payments to dealers, including Williams. He says that delay pushed him out of trust with GMAC by $100,000 in December 2008.
"The first and only time in 30 years," Williams says.
His new-vehicle sales dropped to about 165 units in the first four months of 2009. In May, GMAC contacted Williams again, saying it was revoking his floorplan loan contract.
A few days later, GM notified him that his dealership would be closed by October 2010, making him one of more than a thousand dealers dropped by GM while in Chapter 11.
Williams says he thinks the automaker rejected his dealership as payback for his standing up for dealers’ rights when he was chairman of GM’s Minority Dealer Advisory Council.
"Some GM employees told me, ‘You’ve made some enemies,’ " he recalls.
Dejected, on May 25 Williams sent letters by overnight delivery to GM and GMAC voluntarily terminating his franchise. GMAC picked up his inventory May 27.
Says Williams: "I was caught between a rock and a hard place."