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Cash flow shortfalls doom API

November 17, 2010

Automobile Professionals, Inc., the Schaumburg-based supplier of vehicle service contracts, has gone into assignment, leaving its dealer clients "looking for the money."

In a Feb. 12 memo to all API agents, James Hawk said that after an extended period of drastically declining production volume, API management "determined that it has no choice but to make an assignment for the benefit of API’s creditors."

"This has been a difficult decision made under the burden of severe cash flow shortfalls from reduced service contract production and steady strong GPR activity," Hawk said in his memo.

"We are actively working with our insurance carriers to determine the status of their programs and the possibility that one of them may be willing to move forward with a new program for your dealers."

Calls to API, at 847-519-4550, were not immediately returned; and the company’s Web site, www.apiwarranty.com, has been deactivated. Word of the bankruptcy reached dealers across the country.

"This is so new right now," said one Texas dealer. "We’re trying to figure it out ourselves. We’re pulling original dealer agreements, trying to figure out what’s changed.

"What are we going to do with people we have coming in every single day, wanting to get things authorized? We’re on high alert, and that’s putting it mildly."

First Colonial Insurance Co. and Northbrook Indemnity Co., wholly owned subsidiaries of The Allstate Corporation, have underwritten API’s vehicle service contract program since 2005. Prior to that, Marathon Financial Insurance was API’s underwriter.

A Marathon spokeswoman said the company’s attorneys are working with the liquidator handling API and said that customers—both dealers and end-users—are being given the liquidator’s telephone number. She also said an e-mail account has been set up so that claims and other questions would be forwarded to the liquidators. Similar plans by Allstate were not immediately announced.

Automotive Professionals, Inc., was founded in 1984. The company indicated in 2005 that Allstate selected API because of its solid foundation. Now API joins names like WPC Associates, Inc., which closed in 2006; and Warranty Services Co., which the Better Business Bureau reported has disconnected its lines.

"At the moment, we’re on hold," said one F&I director from a dealership in East Haven, Conn. "Right now we’re not in a situation where we have customers coming to us with claims. It’s too early at this point to know what’s going to happen."

 

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