Olson motors

Auto industry woes and a tight credit market have prompted the closing of Dick Olson Motors, a Madelia auto dealership since 1974.

John Cross
The Free Press, Mankato, MN

Dick Olson Motors of Madelia will close today, ending more than three decades as an auto dealership.

Owner Sherry Olson said tight credit markets led to the closing.

“We have actually had better sales in 2008 than in 2007, which makes this even more difficult,” said Olson, who succeeded her father as owner eight years ago.

She said she received word in December from General Motors’ lending arm, GMAC, that it would not negotiate nor extend the date her vehicle floorplan is to be pulled.

As a result, she said she had no option but to close.

Floorplan financing is a mechanism many dealers use to pay for new cars, then repay using the revenue from those cars.

Many U.S. dealers large and small are struggling as the auto industry’s financial services tighten or cut off their credit.

Industry analysts predict hundreds, perhaps thousands, of dealers will go out of business in the next two years as floorplan arrangements continue to be assessed on a case-by-case basis with each dealership.

“Three months ago I never would have dreamed this would happen,” Olson said. “We’ve dealt with recessions, high interest rates, and gas prices, and that was all in our control.”

But Olson said the mandate by GMAC dictated the business put money into an “offset account” from which GMAC could draw interest.

Olson said without that money her business couldn’t operate, and GMAC was not open to negotiating that condition.

She said when the industry’s financial crisis hit General Motors and GMAC in December, no one knew how quickly the industry would fall and how it would affect dealers.

Dick Olson Motors moved into a new building five years ago and has 16 employees.

“There has been nothing but support from the community over the years, and you couldn’t ask for more as a business owner,” Olson said.

The Minnesota Automobile Dealers Association is tracking the credit issue and expects to hear of more cases such as that of the Madelia dealership.

About 75 percent of the state’s 427 auto dealerships use floorplan financing provided by the auto makers’ lending arms.

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