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If you’ve ever driven on Interstate 95 north of Fort Lauderdale, you’ve doubtlessly seen Champion Motors in Pompano Beach, Florida, home of the world’s largest Porsche dealership. Unfortunately, the dealership also suffered a Chapter 11 bankruptcy earlier this year, and its recovery story in Portfolio magazine gives the layman an interesting look into how dealerships operate.
Dealerships must keep an inventory of cars, and use whats called floor-plan financing for this. Essentially, it’s a fancy name for a loan provided by the bank to cover the cost of buying inventory from the manufacturer. At the time, Champion was getting credit from VW Credit, due to Champion’s Audi franchise sharing real estate with the Porsche showroom.
However, VW Credit cut back the repayment time from 10 days after a vehicle’s sale to 3 days, a move that caused major headaches for Champion, as the cutback came in the middle of 2009′s economic downturn. Undoubtedly, the large and expensive inventory Champion must carry exacerbated the problem.
The Portfolio article explores what happens during the bankruptcy, but also details the various maneuvers used by Champion to shed their dead weight (in this case, an Audi franchise) and re-emerge as a leaner, more profitable business. The article also details how dealership financing works, an interesting topic for those who have overlapping interests in business and cars.