The financial chicanery of a few automotive dealerships continues apace, with a group of Nissan and Hyundai stores finding themselves in several million dollars’ worth of hot water.
Reps for the captive finance arms of those two brands allege that five dealerships owned by auto retail veteran Michael Saporito and former NFL linebackers Jessie Armstead and Antonio Pierce sold nearly $10.5 million worth of vehicles out of trust. Nearly a hundred machines are allegedly missing, as well.
According to Automotive News, someone suspected something was amiss back in July, when audits carried out by Hyundai Capital America came up with discrepancies between the group’s Hazleton Hyundai and Hazleton Kia locations. Not long after this brouhaha, reps from Nissan Motor Acceptance Corp. turned their sights on related Nissan dealerships in Michigan, allegedly identifying more than 400 vehicles that had been financed but could not be located. Last month, lawsuits filed in two separate states purport that Nissan Finance is owed nearly $10 million for vehicles sold out of trust.
In case you missed it last time, here’s a quick course in dealership terminology. For purposes of this post, “out of trust” refers the sale of a car that has been paid for with a loan, but the sale proceeds have not been used to pay back the lender. This creates an unsecured debt the dealer then owes to the finance company.
On July 30, an employee of Data Scan Technologies, hired by Hyundai’s captive finance arm, performed an audit at the Hyundai and Kia stores, identifying 45 Hyundais and 41 Kias — many of which were titled to Hazleton Honda or Hazleton Nissan, according to a verification filing. This is not kosher, as it is said to violate the loan agreements with Hyundai Capital.
If these other stores then granted their brand’s captive finance arms a security interest in the vehicles, that would compound the problem. Folks don’t like it when a person double dips their tortilla chips, let alone floorplan financing. Repayments to the finance companies are reported to also have been missed. Car carriers appeared at a few of the dealer lots and whisked away inventory.
The Nissan dealers in Michigan wrapped up in this debacle currently appear to be in a bit of the shambles. Automotive News reports one of their reporters was told by a person at the store in Dearborn that the place was open but unable to sell or lease vehicles due to “restructuring.” That’s grim. The industry publication went on to say, “On Thursday, Sept. 6, a service department employee at the Dearborn store said all the technicians had left to take jobs with other Nissan dealerships.” Yikes.
Talking heads are speculating the stores aren’t currently dark, thanks to feverish attempts on the part of Nissan to find new owners. Whatever the outcome, the mass exodus of staff will prove a challenge for whoever decides to try and rebuild the place, not to mention the public relations nightmare now associated with those locations. Nissan recently put on a push to increase its market share in the Detroit Three’s playground, with this dealer group being a large piece of that puzzle after All Pro Nissan opened up locations in Dearborn and Macomb about three years ago.
Your author always feels badly for dealer employees who did not create the problem, yet get caught up with — and have their lives affected by — these types of alleged backroom shenanigans. Here’s hoping they all land on their feet.
[Image: All Pro Nissan of Dearborn]