Chrysler Dealerships Closing: 789 Of 3,200 Dealers To Be Eliminated

NEW YORK — Chrysler LLC wants to eliminate roughly a quarter of its 3,200 U.S. dealerships by early next month, saying in a bankruptcy court filing Thursday that the network is antiquated and has too many stores competing with each other.

The company, in a motion filed with the U.S. Bankruptcy Court in New York, said it wants to shed 789 dealerships by June 9. Many of the dealers' sales are too low, the automaker said, with just over 50 percent of dealers accounting for about 90 percent of the company's U.S. sales.

Dealers were told Thursday morning through United Parcel Service letters if they would remain or be eliminated. The cuts are likely to devastate cities and towns across the country as thousands of jobs are lost and taxes are not paid.

Chrysler Vice Chairman Jim Press called the cuts difficult but necessary. He said the list of dealers is final and there will be no appeal process.

"This is a difficult day for us and not a day anybody can be prepared for," Press told reporters during a conference call.

A hearing is scheduled for June 3 in U.S. Bankruptcy Court in New York for the judge to determine whether to approve Chrysler's motion. Judges often rely on companies in bankruptcy to help determine what is in their best business interest, such as the closure of dealerships or cancellation of contracts.

Chrysler executives said the company is trying to preserve its best-performing dealers and eliminate ones with the weakest sales. More than half of the dealerships being eliminated sell less than 100 vehicles per year, they said, and account for 14 percent of U.S. sales.

The company is also trying to reduce the number of single-brand dealerships to bring all three Chrysler brands _ Jeep, Chrysler and Dodge _ under a single roof, they said. It also wanted to limit competing dealerships.

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"We recognize in the short term we will see some loss of sales," Press said. "But based on the long term ... the dealer (network) is key and it's going to be very strong, powerful, with a much better financial viability."

The 3.5 million customers who purchased vehicles from the affected dealers will be notified about the closures and their warranties will still be honored, said Vice President Steven Landry.

Don Burk, co-owner of Heritage Chrysler Jeep in Ozark, Mo., said he found out that Chrysler plans to get rid of his dealership when he opened his UPS letter Thursday morning.

"Right now I'm processing the information," he said shortly after reading the letter. "I'm sure I'm going to get with my partner and we'll decide what to do from here."

The dealership, in a city of about 10,000 near Springfield, Mo., is involved in the community, sponsoring sports teams and even buying championship rings for the Ozark High School girls basketball team when it won the state championship several years ago, Burk said.

"If you're a good-sized business, kind of by default you're involved a lot," he said.

Chrysler dealerships aren't the only ones scheduled to get bad news this week. General Motors Corp. says it is notifying 1,100 dealers that it will not renew their franchise agreements when they expire at the end of September of 2010.

In its motion, Chrysler said it has many dealerships that sell one or two of its brands, with Chrysler-Jeep dealerships competing against Dodge dealers as well as other automakers' stores across the country.

"We understand there's going to be a consolidation of dealers, said John McEleney, a Clinton, Iowa, auto dealer who serves as chairman of the National Automobile Dealers Association. "We just think the process needs to be slowed down."

He said about 187,000 jobs could be lost from the closing of GM and Chrysler dealerships.

Even for dealers that were not included on the list, Thursday's news was not easy to handle.

"It's heart-wrenching," said Chuck Eddy, a Youngstown, Ohio, Chrysler dealer that was not cut. "I've grown up in this business. My dad's been with Chrysler since '57. I've grown up with a lot of these families. That's all I've ever known _ Chrysler."

Chrysler said in its filing that dealers are not competitive enough with foreign brands. Chrysler sold an average of 303 vehicles per dealer in 2008, according to its filing. By contrast, Honda Motor Co. sold about 1,200 vehicles per dealer, while Toyota Motor Corp. sold nearly 1,300 per dealer.

Chrysler said its dealer network "needs to be reduced and reconfigured in a targeted manner to strengthen the network and dealer profitability and to achieve optimal results for the dealers and consumers."

Chrysler has received $4 billion in federal loans and has been operating in bankruptcy protection since April 30. Its sales this year are down 46 percent compared with the first four months of last year and it reported a $16.8 billion net loss for 2008.

Comments

[LMofNV]

I am sorry to say these companies have gotten only what they deserve. In 99 I was going into a divorce after years of owning only US, I found a Hyundai was best for me dependability wise, in late 07 I decided it best to give my son my car as a dependable used car and I would purchase a new one I looked at many brands and kept coming back to the fact after 100K and no major repairs (no repairs due to mechanical) I went back to Hyundai and purchased from them. (for the record the 99 is still in the family now with my sister and doing great almost 150K and still no mechanical repairs. I have paid less in maintenance and repairs for my 99 Hyundai than my husband has for his 2005 Dodge Ram. My point is US auto makers say their product is great, that is fine back it up with the warranty, if you indeed do have a great product owners will never have to use it, but will know you stand behind your product. I have only used my Hyundai warranty once and that was for the 99 and that was to replace the door handle. Just got a call from my Mom, she is at the local Hyundai dealer purchasing her new Hyundai (she is trading in her Dodge, to be fair it is a 96, but also has had the engine replaced 2 years ago). WAKE UP US AUTO DEALERS

[teutonica]

I wonder if the story of Chrysler, GM and Ford had been different if they had not been forced for years to lose billions making small cars because of liberal created cafe standards. All those VWs, Toyotas, etc. available but we had to force them to lose money on those cars. Disastrous mistake. Global warming, cap and trade will end up the same way. Failed industries and a wrecked country.

[lucent]

If I read you correctly, you are blaming liberals for the fact that the big three are failing? Do you remember the 80s when Chrysler had to be bailed out? Do you remember the K car? Do you remember the fact that GM opted for the Hummer as opposed to other more efficient vehicles?WAKE UP and blame those who should be blamed! These companies have been given repeated warnings over the years to change their ways. It is the consumers who have spoken, not policy.The car manufacturers who have continually adapted and are successful, Honda, Toyota and the like, have been giving consumers what they want, it has NOTHING to do with cap and trade, cafe standards.So as a consumer you would prefer having a less effecient vehicle that has horrible service records and rates low in customer satisfaction? Adapt or fail! Businesses must evolve or they fail and that is the way things. American car maker are too short sighted to be successful.

[Ryan Gilbert]

The one where I bought my car must be ahead of their time, because they have been closed for over a year.

[CitizenIndie]

/blush

I meant Toyota, not Honda. That model is on my brain now. :)

[CitizenIndie]

I remember a few years ago, I went to a Chrysler dealership with Consumer Reports and Carfax data on exactly how much a 300M was. I told the dealer I was willing to pay a fair amount over invoice but wasn't paying sticker and getting ripped off.
The guy played that "let me talk to my manager" crap and came out later with "I'll give you 1,000 off, but this is a hot car. Take it or leave it." I was extremely hot and walked. I then went to the Honda dealer and bought something different, a Highlander which I still have. I found out the dealer I went to was one of those on this cut list.
Karma stinks, doesn't it?

[American50]

Thanks Liberals for the ruination of the American economy

[TheBrizz]

Yeah, because things were going so well under the republicans.

[spiffarino]

Come back when you've pulled your head out of the sand.

[lucent]

Are you for real? The liberals? How about the money hording coporations who control the industries over which they lord. It just so happens that the Japanese and some European car manufactures have given Americans what they want, more efficient vehicles, environmentally responsible cars-which they have been working on for years (they took a gamble, did the work and now it is paying off), excellent service records, good gas mileage...gosh, if I remember correctly, in a market economy the consumers make the rules by BUYING WHAT THEY WANT regardless of policies (Just look at all the SUVs people bought over the last 10 years, when it was clear in 73 when Nixon decided that we would ween ourselves from foreign oil-Carter tried it a few years after tha, too...counter intuitive) ....it is ironic that those who throw out the freemarket economy ideals, never do it when it doesn't work in their favor...I think the consumer has spoken and the big, glitzy gas guzzling automobiles are a thing of the past, that is unless billions can be thrown at advertising in order to convince the weak minded (love those truck ads that run every ten minutes during sporting events...(­YEAH...Ame­rica F*&% Yeah!!!)- and the government provides tax incentives a la the Hummer- to buy cars that go against EVERYTHING a free market economy espouses! Counter intuitive!

[bsod]

You are a communist. Glad that BHO is destroying an industry that employs thousands of people? This is how he creates jobs? In a couple of years when the economy completely collapses I will be laughing at you liberal idiots who dont understand even basic economics and instead cling to naive slogans like " money hording corporations who control the industries over which they lord". Communism and Socialism have already been tried elsewhere multiple times and havbe always failed. BHO's 3 year plan will fail too.

[SonofLiberty1]

We've been telling the Big 3 for years and years now that it was time to produce more fuel efficient cars. And now, finally, we were proved correct.

Sadly, a lot of hard working Americans are going to lose their jobs because of their bosses collective idiocy, that served them well enough getting very wealthy, at the average Americans expense.

I hope that a lot of CEO types are taking notes...

[65196183]

In all due respect, how can we not have mixed feelings? By late 2007-2008, my 2002 Saturn had well over 150K miles, and I needed to drive 110 miles roundtrip for work each day. Gas prices, as we all know, were $4.50 per gallon. Not wanting to pay $4000 extra for the equivalent Japanese car (or VW), I first visited the American dealers. Month after month was advertised as "This is Truck Month" with banners and balloons. It was clearly a matter of trying to sell something that was losing it's market, with no concern at all for the needs of the customer. To make matter worse, leasing was all but dead and negative equity almost a given when a dealer of any type will not take a trade unless there's a $4000 spread between trade in and resale value. When the Saturn met it's inevtiable demise just before Christmas 2008, I really wanted to buy something that would keep the profit in the US, not that 1 car really matters. What did I do? Bought a Hyundai Sonata, made in Montgomery AL, but by no means a domestic car. Am I proud of it? No. Would I do it again? Not sure. I don't feel good about shopping at Wal-Mart either, but I have a mortgage payment each month, and job that hangs in the balance from 1 week to the next.

[hypnotoad72]

I must agree; ever since gas prices went up, many wanted solid and fuel efficient vehicles.

I kept seeing ads for SUVs and big trucks.

A relative of mine bought a Ford hybrid SUV. It was shortly returned due to the number of problems it had, and that the closest service station that could actually service it was well over one hour away. What did management tell the workers? Where to get the parts from? Cheapest possible parts? Any quality control at all?

Of course, once done breaking the companies, they get to retire with big severance packages - you know, the ones they say they, like their big big wages, deserve because what they do can make or break the company.

Why did our economy seem so much more stable when executives made only 40x that their average worker, instead of 800x - and they still think everyone is paid too much?

On the plus side, Harry Ford is utterly innocent. He knew better, for lots of things.

Sorry to not dig into Chrysler, but they're big into the trucks and appeasing those with SPS too...

[lucent]

I understand how you feel, and with all due respect, I must say that in America we have always prided ourselves on the quality of our products. With quality comes price. The paradox is that we have been trained to look for the best price, get the best deal and get the most satisfaction from our purchases. Jobs have been shipped overseas to satisify Americas demand for better prices. In all honesty we can not have our cake and eat it too. Something has to give, as sometimes satisfaction and price (not always) can be diametrically opposed-cheaper usually means poorer workmanship. With labor markets in other countries paying less in wages, with unions in our country (and I am for them by the way) charging so much in dues to justify future security for the workers, something has to give. It is a balance. If we could convince American consumers that American cars would hold up like a Honda, more people will buy them and more people would be willing to pay a bit more. We just need to strike a balance, something we have not done in years. It seems like the well might be running dry and the folks who took two buckets instead of one everytime they got water are suprised.

[susan20515]

10% of the dealers do 90% of the sales

[levelshot]

Chrysler is a clear example of the American people losing trust in a company and it's product. The egotistical macho managers that have run these companies like Chrysler and encouraged maximizing short-term profits at all cost and paying excessive pay to executives only to deliver a product that is poor in quality and unreliable to make "Money" and not retain the public trust has run rampant here in America. And if we the people keep going along with this system and allowing these businesses to have the attitude "Business is Just about Making Money" we will never see economic stability and prosperity in America again as our economy will continue to fall over into the abyss it's teetering to fall into today.

[petphotos]

This is just why Bob Nardelli must go, and I gather is going at Fiat's insistance. He just about ruined Home Depot, and GE before that. Total failure.

[cjt1957]

If by ruining Home Depot you mean its stock price did not grow, you are right, by every other measure he was very good there, more stores, more sales, more profits, the stock price never reflected it. Try doing some research.....

[susan20515]

Yea Right. Nardelli is solely responsible for the demise of Chrysler. Come on.

[hypnotoad72]

Thank you. It is NOT about the workers being overpaid ($70/hr was B.S.), and if there is a legitimate concern about health care costs, it's high time health care gets reform ($20 for an aspirin when I can buy a case of them, 1800x as many, for the same price?! And CPAP gear; replacement mandatory every 6 months. Not just the nosepiece but the ENTIRE headgear AND tube. Grossly wasteful... and needlessly expensive.)

"Business is about making money" - but if only people at the top have money, they'd sell each other out to get more money too. Business needs a society; it's as simple as that.

[mollyjackson]

I'll bet you Obama is working on which Chrysler dealerships survive based on campaign donations. This is how Democrats do this.

[Spud777]

LOL mollyj: Don't know if the Obama Administration is doing this (nor do you by the way), but certainly the republicans do it all the time, that is well proven. I guess you are one of the GOPers who say, "do what I say, not what I do". Again, thanks so much for your humorous post, made my day.

[smiththomas]

everything was in consideration of the unions. bond holders and dealers left high and dry.
its all politics

[frantaylor]

"All politics"

Apparently saving money has nothing to do with it.

Many of these dealers really suck and should have been dropped long ago.

[sposton]

Of course, Republicans do it better! If I were a Republican I would crawl under the nearest rock in shame. But of course, one of the defining characteristic of modern day Republicans is that they have no shame.

[Demetria Nelson-Mcnaulty]

You are so intelligen­t----"NOT"

[hypnotoad72]

Hi! Four things:

1.
http://www.bloomberg.com/apps/news?pid=20601087&sid=azQJo_wu7f64

2.
http://www.americablog.com/2009/05/big-business-lobbyists-obama-is-mean-to.html

3.
http://news.yahoo.com/s/ap/20090515/ap_on_go_pr_wh/us_obama_business

4. How come republicans can lobby - yet nobody else is allowed to? See #2, it looks like President Obama is trying to fight what your special friends over the last 30 years simply encouraged.

So, please stop being myopic.

[PhilipTaylor]

Obama Team says that is Main Street and we don't CARE!

We only help our Contributor Friends on Wall Street!

[themodernleader]

Our forebears spent the good part of 200 years developing the science and technology and human competence to create the most invincible manufacturing and technological system in the world. Now the smart people from the higher education class have used the last 25 years to hostilly take over, pillage, over-leverage or dismantle and sell out knowledge and skill, productivity and plant to foreign nations.
The next to last great hallmark of that system was the automobile industry. The university trained financial robbers within this administration appear to relish the pain of the last remnants of industrialization as they place draconian conditions that destroy the livelihoods of the people that made America a prosperous, free and safe country. These men of words that have come to dominate our economy and politics are the same actors that created a dynasty of two thousand years of changeless suffering and exploitation in China; that turned the Roman Empire into inspired knowledge and state mandated bookburnings which set back civilization for a thousand years; that turned dynamic Middle and South American civilizations into oligarichies dominated by secretive knowledge and high priests that stunted human growth and development for long stretches of human history.
The civil servant and talkative classes have overrun and destroyed the careers, opportunity and future of the men of action, productivity and performance who generated the wealth of this broke and broken republic. Our next assignment is servitude and obedience to the Wise, Learn'ed and dynasty.

[frantaylor]

I got news for you. The "smart people" from the "higher education class" are the folks who have brought you the automobile and every bit of progress that goes with it. High-mileage cars, traction control, advanced safety features, these things are all products of software weenies and their modern computers, The "tinkerer" in the automobile business is gone forever, thank goodness.

These same people designed the computer you are typing on, the server this web site is running on, and the network that links. them.

Just think, your silly little rant about technology would not exist without the technology that you are ranting about.

[sposton]

I think he was talking about the financial types from our elite universities. He is not talking about engineers and such. I must agree with themodernleader. Some of the dumbest people I've ever met had MBA degrees from our elite business schools. They have the kind of smarts that is killing this country.

[Demetria Nelson-Mcnaulty]

Honey, I do not read pamplets, this is a blog site.

[LaHenche]

As our economy and the world are being remade, there will be plenty of casualties. I feel bad about that. Then on the other hand, I think about the times that I've actually purchased a car: the poor service, slimey sales people, and I think: good riddance.

So long Auto Cabal. The world is better off without you.

[frantaylor]

The Auto Cabal will continue to exist in other countries, just not the one you happen to be in.

[MikeCanada]

I have worked in auto service for 20 years, exclusively at dealers. If there is one problem this will solve it is this: dealers will be able to rid themselves of dishonest and poor performing technicians. The remaining dealers will be able to pick from the cream of the crop, the most talented and honest. This will serve the customers well.

[frantaylor]

As if anyone with half a brain took their car to a dealer for service. I have never met a dealer mechanic who had even one iota of passion for their craft.

On the other hand, specialist garages are the best. The mechanics are driven maniacs who sneer at people who drive anything else. They can go on for hours about how one brand of gasket is better than another. These are the people that you want working on your car. The guy I go to will not give me back my car until it is perfect, and he charges way less than the dealer labor rate.

[cjt1957]

So where do you get your warrenty work done?