When Chrysler Financial Services pulled the plug on Minnesota dealer Denny Hecker last fall, a Jan. 23 Chrysler Financial lawsuit against Hecker has shed some light on why Hecker was forced to close six of his 16 dealerships and sell three others. The suit alleges that Hecker owes Chrysler Financial $550 million, according to Automotive News.
The lawsuit could put Hecker out of business. According to the suit, Chrysler Financial lent more than $50 million to Hecker personally. The remainder reflects loans made to companies that Hecker owns or controls, according to the suit.
The action follows a lawsuit Hecker brought against Chrysler Financial on Nov. 13. In that suit, Hecker alleges the captive canceled his credit lines without warning.
For 20 years, Chrysler Financial provided most of the inventory financing for Hecker's dealerships, including several non-Chrysler brands. Chrysler also has provided fleet financing for Hecker's leasing business and the financing and most of the cars for his rental business, Advantage Rent A Car. Chrysler Financial says its loans went to more than just Hecker's automotive companies. The captive also names real estate and investment firms and other companies Hecker owns or controls.
But in October, Chrysler halted dealership floorplanning and in November cut off credit for the leasing and rental-car operations. After closing or selling nine dealerships in November, Hecker filed for Chapter 11 bankruptcy protection for Advantage in December.
Chrysler Financial says in the suit it is “seizing, foreclosing against and selling” the collateral that secures the debts. That includes almost every business that Hecker owns. Hecker still owns and operates seven dealerships: three Hyundai stores, two Toyota, one Chevrolet and one Cadillac-Pontiac-GMC.
Last month, Ford Motor Co. sued Hecker for $3.1 million, alleging that his now-closed Ford-Lincoln-Mercury store in Stillwater, Minn., owes Ford for the sale of vehicles and parts.
In his lawsuit, Hecker maintains that he had good relations with Chrysler Financial until Cerberus Capital Management LP bought Chrysler in August 2007. He says the relationship was so tight that, at Chrysler's request, Hecker bought Advantage Rent A Car in February 2006 to help Chrysler avoid a possible loss of $70 million or more if Advantage went bankrupt.