Remaining Dealerships To Sell All 3 Chrysler Brands

by Karl Greenberg, May 14, 2009, 3:16 PM

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Thursday morning, 789 Dodge, Jeep, and Chrysler dealers learned by overnight UPS that June 9 will be the end of the road with Chrysler, Inc. The company, in bankruptcy protection, will keep 2,392 dealers, which account for about 86% of volume. Every state is affected, and estimates are that about 40,000 dealership employees will lose their jobs.

To jettison the dealers, which usually means having to buy them out per state franchise laws, the Auburn Hills, Mich.-based automaker filed a motion with the U.S. Bankruptcy Court Thursday. The dealership cuts are subject to court approval.

The remaining dealers will be part of Chrysler's global deal with Fiat. In a press call on Thursday, Jim Press, Chrysler vice chairman and president, said the retained dealers are those that are selling all three Chrysler brands. "Because of restructuring, we will be developing fewer models and not adding products to support stand-alones," he said.

Press also said the move does not include an appeal process or objection criteria to which rejected dealers can resort. "There are no winners or losers. We have submitted our lists to the court, and the list will not change," he said. "In the process of approval in the court, there will be some legal counsel representing the lists of dealers -- and they may make motions in the court, and we can't speak to that -- but our process is done, and we don't have a review process that would change this."

Steve Landry, EVP, North American sales and marketing, said that warranties will be shifted to other dealerships. "The consumer may or may not choose to buy from a rejected dealer; there are about 3.5 million owners associated with the 789 dealers going out. A lot of service contracts are sold by multiple dealers and most are our own contracts to be honored at all dealerships," he said.

He said Chrysler will redistribute new vehicles and parts to the remaining dealer network. The court has also approved a motion vis à vis Chrysler's agreement with GMAC Financial Services to provide the automotive financing products and services to the company's dealers and customers henceforth. That deal makes GMAC Financial Services the preferred lender in North America.

General Motors, which killed Oldsmobile and had to pay around $1 billion to buy out the brand's dealerships, reportedly is also planning to close 42% of its 6,200 dealerships.

Said Press: "The industry has been coping with excess dealer capacity for 15 or 20 years. This is the time to address structural issues that have given domestics a disadvantage in the market. The fact is, the opposite of bankruptcy is liquidation, and through liquidation everyone loses -- it's all gone; we are preserving this company through the future with an alliance with Fiat. Is there a more humane way to do it? No. This is a game where there's going to be some dealers rejected, and there's no way to say anything other than there must be sacrifice for the good of the total or nobody survives."

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