Jim Slemons Imports Files for Bankruptcy
Jim Slemons Imports, ranked the nation’s eighth largest auto dealer with $110.2 million in revenue last year, filed a Chapter 11 bankruptcy petition Friday as part of a plan to stabilize its sagging finances while it seeks a buyer.
Malcolm McCassy, Slemons’ general manager, said Slemons is seeking at least $15 million for the Mercedes-Benz franchise and that there are “at least four written offers on the table that we are considering.” He would not say whether any of them met Slemons’ minimum price, however.
A sale would not involve the Newport Beach property that the dealership sits on. All of Slemons’ real estate is owned by a separate company, Jim Slemons Investments, which has mortgaged it for almost $12 million to Sumitomo Bank of California.
The Slemons Imports bankruptcy, which lists $17 million in assets and $22 million in liabilities, does not involve any of flamboyant car dealer James B. Slemons’ other dealerships or businesses, said McCassy, adding that Slemons did not file for personal bankruptcy.
While business reverses are at the root of Slemons’ financial troubles, the longtime Newport Beach society figure’s lavish personal lifestyle, which includes several expensive divorces, is reported to have contributed heavily to his problems.
Friday’s so-called friendly bankruptcy filing was accompanied by a guarantee of $3.5 million in new financing from the Mercedes-Benz dealership’s major creditor, Tokai Credit Corp. in Pasadena, which is owed $10.5 million.
The funds will enable Slemons Imports, which last year was the fourth largest seller of new Mercedes automobiles in the country, to buy new and used cars for its shrunken inventory and to clear up its nagging problem with delayed payoffs on customer trade-ins, McCassy said.
As of Wednesday, Slemons owed about $80,000 on eight cars that customers traded in when they bought new vehicles.
McCassy said that while the trade-ins represent only a small part of the dealership’s debt, they created a major public relations problem that has damaged Slemons’ ability to sell cars.
In addition, he acknowledged Friday for the first time that Tokai has not loaned it money to acquire new cars from Mercedes since early June.
While the Chapter 11 filing automatically halts any claims that were filed against Slemons Imports before Friday, McCassy said the dealership intends to pay off all of the customer trade-ins as soon as possible.
“We hope this deal will put everyone’s mind at rest,” McCassy said.
The bankruptcy petition, he said, was the result of several weeks of negotiations with Tokai.
“The incentive for the bank,” he said, “is to protect its assets and allow us to go forward and procure a buyer without undue financial pressure.”
Under the agreement with Tokai, Slemons remains in possession of the franchise and will continue operating with the same management team. Tokai officials issued a one-sentence statement about the deal: “We are pleased to provide post-petition financing for Jim Slemons Imports.”
The $10.5 million that Slemons Imports owes Tokai is for loans extended during the past three years, McCassy said.
Slemons’ financial woes began about three years ago when he lost $13 million in the bankruptcy of a small commuter airline in Santa Ana in which he had invested heavily.
In addition, his auto dealerships--he now owns five--have been hit hard by a national auto sales slump that began in 1989.
Slemons recently sold his Acura and Honda franchises and last year closed a Daihatsu dealership. In addition to Slemons Imports, he owns a Volvo franchise in Hawaii, a Jeep-Eagle dealership in San Clemente, and an auto-leasing firm and a small custom-car sales office, both in Mission Viejo.
Sales at his flagship Slemons Imports were further disrupted by a 10% federal luxury tax on car prices in excess of $30,000--a tax that affects most Mercedes-Benz models--that began Jan. 1.
Slemons’ finances also have been strained by a lifestyle that includes ownership of an 83-foot motor yacht that requires a crew of two and the costs of maintaining three homes in Newport Beach, two in Hawaii and one each in Palm Springs, Big Bear and Santa Catalina Island. He has also been divorced five times and several of the settlements involved substantial cash and property settlements, including a $4.5-million cash payment to his fifth wife.
Reversal of Fortunes
Jim Slemons Imports Founded: 1961 Address: 1301 Quail St. Newport Beach Employees: 200
1990 Statistics New Cars Sold: 1,231 New Car Revenue: $61.3 million Total Revenue: $110.2 million Assets: $17 million Liabilities: $22 million
Nation’s Top 5 Mercedes-Benz Dealers
Revenue Dealership Units (millions) 1. Loeber Mercedes 1,880 $62.6 Chicago 2. House of Imports 1,733 $87.1 Buena Park 3. Downtown L.A. Motors 1,712 $83.6 Los Angeles 4. Jim Slemons Imports 1,231 $61.3 Newport Beach 5. Smythe European 889 $49.2 Mercedes, San Jose
Source: Auto Age magazine