Chattanooga: Trustee seeks buyer for Prebul dealerships

The bankrupt Prebul automobile dealerships in Chattanooga and Dalton, Ga., could resume limited operations this week and get new owners by this spring, the court-appointed trustee for the businesses said Saturday.

Jerrold Farinash, the bankruptcy attorney trying to liquidate a half dozen automotive businesses owned by Joe Prebul, will ask a federal judge Tuesday for permission to use cash collateral to resume some operations while seeking buyers of the idled dealerships.

Prebul’s Chrysler, Dodge, Jeep, Kia, Volvo, Infiniti, Pontiac, GMC and Piaggio dealerships halted sales and service after Mr. Prebul was arrested Tuesday on fraud charges. He is accused of swindling his brother-in-law out of more than $7 million. The next day, Mr. Prebul’s businesses filed a Chapter 7 bankruptcy petition, listing more than $30 million in debts.

Mr. Farinash said he hopes to find one or more buyers for the dealerships in the next couple of weeks, although any sale will require approval of the bankruptcy court and car manufacturers.

“There is a lot of interest in these dealerships, and we continue to receive a lot of calls,” Mr. Farinash said. “We have tentatively set March 2 as a deadline for people who are interested to submit their bids.”

The trustee said he hopes to recommend to the bankruptcy court the best buyer or buyers for the dealerships sometime in March. Mr. Farinash said manufacturers typically take 60 to 90 days to approve franchises for new car dealers.

In the meantime, U.S. Bankruptcy Court Judge John Cook will conduct a hearing at 1 p.m. Tuesday to consider a motion to allow the trustee to use cash collateral to continue some business operations at the Prebul lots. In his motion filed Friday, Mr. Farinash said continuing ordinary operations is needed “to avoid irreparable harm” to the dealerships.

“We’ve had some very decent people who came in and continued to work without assurances that they would be paid,” he said. “If our motion is approved, I believe we should be able to continue to bring people back and do more each day. I don’t anticipate bringing all of the 250 (of the Prebul employees) back to work, but we do hope to have some operations at these dealerships.”

shifting service work

In the meantime, other car dealers already are picking up business from the shuttered Prebul sales lots and service bays.

“My phone has been ringing off the hook,” said Mike Jenkins, a LaFayette, Ga., Chrysler dealer who plans to expand his service department to help handle the increased business.

Other Chrysler dealers in Ringgold, Ga., and Dunlap and Cleveland in Tennessee also reported more calls and service requests since Prebul suspended operations.

“We’ve already had done several cars with warranties (from Prebul),” said Mike Robbins, general manager for Ringgold Chrysler, Dodge and Jeep, which is honoring both Chrysler and Fidelity service contracts sold by Prebul. “We were all shocked by what happened at Prebul, but I hope it will increase our traffic because we’re all suffering in this market.”

Prebul operated the only Chrysler, Dodge, Jeep, Kia, Infiniti and Volvo dealership in Chattanooga. Consumers will be able to get warranty work done for such models at other dealerships. But they may have to drive farther to get the work.

“We’ve had several calls from Infiniti owners in Chattanooga, and we’re delighted to take care of them,” said Dale Underwood, general manager for Harper Infiniti in Knoxville.

Representatives from Chrysler and Kia said Friday they are eager to fill any void in Chattanooga created by the bankruptcy of Prebul’s businesses.

“It’s a turbulent time right now, but I’m sure Chrysler wants a presence in Chattanooga,” said Bill Kile, president of Kile Chrysler in Cleveland, Tenn.

Alex Fedorak, director of public relations for Kia Motors American Inc. in Irvine, Calif., said the Korean automaker wants to serve the Chattanooga market, although any change in its local dealers is still limited by the bankruptcy and Prebul’s previous franchise agreement.

“We are committed to the Chattanooga market and to Kia owners who live there,” Mr. Fedorak said. “At the same time, we are bound by local and state laws with regards to the status of Prebul Kia and those law will dictate our next steps.”

dwindling dealers

The Prebul dealerships lost more than $1.5 million from 2005 to 2008, according to the complaint filed against Mr. Prebul last Tuesday. The car dealer was charged with 11 counts of wire fraud and has been sued by his brother-in-law, Danny Bensusan, for not properly investing nearly $7 million Mr. Bensusan wired to Mr. Prebul over the past three years.

Jeffe Toprak, senior analyst for Edmunds.com, said 85 percent of the dealers closing last year were Detroit Big 3 dealers, such as Prebul’s Chrysler, Pontiac and GMC franchises.

“The general weakness in the market is probably going to bring another 1,000 or more dealership closings this year, and most of those will be domestic car dealers,” he said.

According to the National Automobile Dealers Association, the number of new car dealers dropped by 760 during 2008. NADA Economist Paul Taylor said he expects car sales will be lower in 2009 than the previous year despite some signs of improving credit markets.

NADA forecasts about 1,100 car dealers will close nationwide this year, compared with 150 to 200 dealers that will open.

“Credit remains a difficult, but surmountable, problem for both car dealers and car buyers,” Mr. Taylor said. “For many franchised new car dealers, we’re seeing gradual improvement in credit, but we wish it were more dramatic.”