Bankruptcy Action Upsets Yugo Dealers : But Manufacturer Will Take Over Car Importer and Finance the Firm
Southern California Yugo dealers expressed disappointment this week as they grappled with the news that the car’s U.S. importer had filed Monday for protection under federal bankruptcy laws. But there was optimism about Yugo’s future.
“We’re pretty surprised by the whole thing,” said Angel Garcia, the assistant manager at Sopp Chevrolet/Yugo in Highland Park. “I wasn’t expecting this. We’ve been doing pretty good with sales.”
Global Motors, the Upper Saddle River, N.J., firm that also markets the Yugoslavian-made cars in the United States, filed under the U.S. Bankruptcy Code’s Chapter 11 as part of a reorganization plan to save the strapped company. Zavodi Crvena Zastava, the Yugoslavian manufacturer, will take over the company and finance it.
Although some former dealers have complained about Global’s handling of warranties, Ronald Hoffman, Global’s senior vice president for operations, said the company plans to honor its customer warranties despite the bankruptcy petition.
When introduced in 1985 as the country’s cheapest basic transportation vehicle, the Yugo received national acclaim. The praise was short-lived, though, as consumer and safety advocates began panning the car almost immediately afterward. In 1988, sales of the Yugo plummeted by about 35%, dropping to 31,545 cars from 48,812 in 1987.
Still Promoting Car
“I hope the company can turn itself around,” said Kevin McNamara, the sales manager at Saunders Ford-Yugo in Mission Hills. “I think the company will survive. Eventually, Zastava will carve its niche in the market. . . . It’s a good car. The company just wasn’t making a go of it.”
Dennis Marth, the general manager of Valencia Dodge-Yugo, said: “We were selling about 8 to 10 every month. . . . Everybody here still pushes the car strongly. It’s been selling good up to now.”
“I think it got a bad break,” he said. “It’s a good car for the price you pay. Unfortunately, Yugo hasn’t advertised the car since 1985. If you’re afraid to advertise, you’re afraid to sell. They don’t believe in advertising, and that’s 90% of the car’s problem.”
Imperial Corp. of America, the San Diego-based parent company of Imperial Savings & Loan, on Jan. 6 created a $16-million loan-loss reserve to cover the entire amount of a “venture capital” loan made to Global Motors in 1988. Imperial spokesman Tim Larrick said at the time that the company expected to “write down all or a significant portion of the loan.”
On Wednesday, he said Imperial will “observe along with everyone else what happens in the course of negotiations with the Yugoslavian government. But the issue is really behind us because of the loan-loss provision.”
