Employees at Denny Hecker auto dealerships got an unpleasant surprise this week when they learned their company health insurance had been canceled and that some workers would not get a paycheck Tuesday.
Employees and their family members said they learned late Tuesday that their company health insurance with Medica had been canceled on Monday for lack of payment from the company. Some employees said they found out when they called to inquire about a medical bill they received in the mail. One family said they found out only after bringing their child to the emergency room and being told they no longer had medical coverage.
Hecker has about 500 employees remaining in his various enterprises. It's unclear how many of them were affected by the cutoff in insurance or payroll delays.
Barbara Jerich, president of the Hecker Automotive Group, told the Star Tribune via e-mail that employees were notified Tuesday. "We were informed on late Monday that the benefits would be suspended as of Tuesday," she wrote. "Some employees may have gone into the doctor or to the pharmacy before we held the meetings letting them know about what happened."
In another dose of bad news, some employees who are paid twice each month learned they did not get their regularly scheduled paycheck Tuesday because of a lack of cash within the company. Employees asked not to be identified for fear of losing their jobs.
They are the latest casualties of the Denny Hecker auto empire that is in shambles after a series of lawsuits demanding $567 million in combined loans and contractual payments that are allegedly in default.
In a statement Wednesday afternoon to the Star Tribune, the Denny Hecker Automotive Group blamed "an unfavorable cash situation" for holding up some paychecks.
"We expect to have these checks released no later than Friday. As a result of the downturn in the market and the economy overall, many dealers are having to deplete their on-hand capital," the company wrote.
Officials blamed a "difficult cash flow position" and the "negative press we have received" for its health coverage interruption as well.
As a result, "our medical provider put additional requirements on us, which we were not able to meet with just a few days notice," the statement said. "We are working on a plan to reinstate these benefits and hope to have a resolution in the next few days."
Regrets and thanks
The statement did not describe the additional requirements imposed by its health care provider. The company expressed regrets and thanks to employees for their continued loyalty.
Local dealers and auto industry experts said privately that they were surprised that Hecker's situation had declined so precipitously that the health insurance of remaining workers would be affected. They were unaware of other auto dealers withholding pay or letting health insurance lapse because of cash flow problems.
Hecker has cut about 2,000 employees across the country as he has shrunk his vast automotive business holdings after they became mired in financial trouble in the fall as dealership traffic slowed, consumer credit tightened and the recession deepened.
Hecker sued his longtime financial backer, Chrysler Financial, for breach of contract in November when it severed ties.
Chrysler yanked credit lines for 13 Hecker dealerships and 28 other business entities. In March it began foreclosure proceedings on 21 of his properties.
In January Chrysler countersued, accusing Hecker of failing to repay it for hundreds of vehicles he had already sold. The lawsuit listed 41 Hecker business entities that it helped to finance and demanded $550 million in defaulted and accelerated loan payments. The amount included a $50 million personal loan and about $73 million that Chrysler recently retrieved after selling off various property.
Since last summer, Hecker has shut 15 car dealerships in Minnesota and sold or shut two in California.
He suspended operations of his Walden Fleet Group and Rosedale Dodge leasing operations.
And he put his Advantage Rent A Car operation in bankruptcy court in December and announced last month that Enterprise Rent A Car will buy the assets from eight of the 48 Advantage locations.
Dee DePass • 612-673-7725