Chrysler Seeks To Reduce Dealership Numbers

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Automaker Chrysler wants to close nearly a quarter of its dealerships. In a bankruptcy court filing Thursday, the company said that 789 dealership are slated to be shut because their sales are too low. GM is expected to make a similar move.


From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.


And I'm Robert Siegel. Around the country, Chrysler dealers were waiting today for just one guy to walk onto the lot, the UPS man. UPS delivered special letters from Chrysler headquarters this morning, telling dealers whether or not they would survive. One quarter of them got bad news.

Chrysler plans to shut those franchises as part of its restructuring and bankruptcy court. NPR's Martin Kaste has details.

MARTIN KASTE: The news is still sinking in at 789 Chrysler, Jeep and Dodge dealerships around the country. Ron Miller is the sales manager at Gegnas Chrysler Jeep, a four decades old dealership in a working class neighborhood of Philadelphia.

Mr. RON MILLER (Sales Manager, Gegnas Chrysler Jeep): Kind of makes you a little numb, just because of the amount of time we've been here, the people we've serviced, the cars we sell. The area, there's a market for this car in this area. So I didn't think that we'd be on the list.

KASTE: But dealers have known for some time that Chrysler wanted to cut their numbers. All three American car makers have a lot more dealers than the imports do, something analysts say has bogged down their distribution system. Bernard Swiecki, an analyst with the Center for Automotive Research in Ann Arbor, says as the Big Three shrink, so, too, must their dealership network.

Mr. BERNARD SWIECKI (Analyst, Center for Automotive Research): They have the corporate structure and the overhead of larger companies than their market share now makes them. You know, so unless you trim some of these costs, you basically are a smaller company with the expenses of a larger company.

KASTE: The Big Three have had programs to cut the number of dealers, but that process has been slow and expensive. They've had to buy out franchise contracts, and they've run up against state franchise laws, passed in legislatures that have been more sympathetic to local dealers than to the car makers. But now, with Chrysler in bankruptcy court, the rules have changed. Chrysler vice chairman and president, Jim Press.

Mr. JIM PRESS (Vice Chairman and President, Chrysler): The process we're in, the bankruptcy process, does allow us a once in a lifetime chance to accomplish a right sized realigned dealer body, and it allows us to address the dealerships with significant performance or customer satisfaction issues.

KASTE: Chrysler says it's closing the least productive dealerships, or those with poor customer service. They're also trying to get rid of redundancies, cases of, say, two Dodge dealerships competing for customers along the same strip of highway.

The National Automobile Dealers Association is reacting with dismay, but also some fatalism. Chairman John McEleney acknowledges that things are different now that Chrysler is in bankruptcy.

Mr. JOHN MCELENEY (Chairman, National Automobile Dealers Association): You know, our hope is that the franchise agreement and the franchise laws are not totally inoperative in bankruptcy, and the court has a lot of latitude over that, how much they choose to ignore, and how much they choose to comply with.

KASTE: That's the big question now. Will the bankruptcy court let Chrysler off the hook for compensating dealers for unsold inventory, and so on? General Motors is watching this very closely. It wants to close even more dealerships, and it, too, is weighing bankruptcy. In the meantime, Jim Arrigo, a surviving Chrysler dealer in Florida, says this will all help him keep selling.

Mr. JIM ARRIGO (Chrysler Dealer): I just hope that people understand that this isn't like a fire sale with these cars. These cars are going to go to other Chrysler Jeep and Dodge dealers to be sold at retail like normal.

KASTE: At the same time, Arrigo remembers to be a salesman, and he reminds people that prices on Chryslers have never been this good. Martin Kaste, NPR News.

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