Chrysler Tells Dealers Who's On The Hit List

Chrysler wants to close one-quarter of its dealerships — that's 789 Dodge, Jeep and Chrysler showrooms across the country. The company calls it a hard decision. Many of the surviving dealerships hope this "cull" will make them stronger.

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RENEE MONTAGNE, host:

This is MORNING EDITION from NPR News. I'm Renee Montagne at NPR West.

STEVE INSKEEP, host:

And I'm Steve Inskeep in Washington. Chrysler gave notice yesterday, and nearly 800 Dodge, Jeep and Chrysler showrooms across the country learned they will be dropped from the company's lineup. That's about a quarter of Chrysler dealerships. The company calls it a hard decision, but as NPR's Martin Kaste reports, many of the surviving dealers hope the cuts will make them stronger.

MARTIN KASTE: For years, Chrysler has wanted to cut the size of its dealership network, but it's been stymied by state laws that protect local franchises. Now that the company's in bankruptcy, it's easier to swing the axe. Company Vice Chairman Jim Press announced the cuts at a teleconference yesterday.

Mr. JIM PRESS (Vice chairman, Chrysler): I'd like to start by making it clear that there are no winners. There's no losers.

KASTE: Actually, there are winners and losers, and it all came down to what was inside an envelope.

(Soundbite of paper ripping)

KASTE: Yesterday morning, special UPS letters arrived at all Chrysler dealerships in the country.

Mr. JOHN FUREY (Owner, Chrysler-Dodge-Jeep Dealership): Maybe I should preserve this envelope instead of destroying it.

KASTE: John Furey owns the Chrysler-Dodge-Jeep dealership in Malvern, Ohio. The dealership is one of the tiny town's main businesses, so a lot was riding on what this letter said.

Mr. FUREY: Dear Mr. Furey, we are pleased to inform you that on May 14th, Chrysler designated your sales and service agreement to be assumed. You can remain our dealer as we move forward with establishing a new company.

KASTE: Furey took the good news out to his staff.

Mr. FUREY: We got the envelope. What are you going to do with your next career? I'm kidding. We got thumbs up.

KASTE: Furey was actually in a pretty good position. Small town America has been relatively kind to Chrysler brands, especially Dodge trucks. The company was more concerned about metro areas, places where Chrysler dealerships often end up competing with each other, dealerships like Great Northern Dodge near Cleveland. Owner Ed Schartman got the bad news version of the letter.

Mr. ED SCHARTMAN (Great Northern Dodge): We've been with them 30 years, and we thought we'd done a good job with them as far as selling cars, parts, service, body shop. And we never had any indication anything was going to change.

KASTE: Dealers like Schartman buy their new cars from the factory, often with loans from local banks. Now that Chrysler's in bankruptcy, they're stuck with what's still on the lot.

Mr. SCHARTMAN: As far as they're concerned, I own everything. They own nothing. So I'm on the hook for whatever is out there.

KASTE: The National Automobile Dealership Association says it's worried that banks will call in their loans to the dealers that were cut by Chrysler, which may force those dealers to liquidate and further depress new car prices for everybody.

It's not a given that the court will allow Chrysler to cut free from all its obligations to the dealers. Joel Lawler, sales manager at West Minster Dodge in Boston, says his franchise is going to appeal.

Mr. JOEL LAWLER (Sales Manager, West Minster Dodge): We are appealing. We got to go down, we're not going to go down without a fight. We're shocked. We're angry. We're disappointed. And we don't think it's fair.

KASTE: Still, most Chrysler dealers stand to benefit from this plan. It eliminates some of their competitors, and it may even save the brand. Big holding companies, those that own hundreds of dealerships around the country, have welcomed the move, even if they lose a few franchises in the process.

(Soundbite of crowd chatter)

KASTE: But even for the bigger dealership companies, this hurts. DARCARS Automotive Group in the Washington, D.C. area has eight Chrysler franchises. But yesterday, two of those franchises got the bad news letter from Detroit. Executive Tammy Darvish says her parents put a lot of work into building those dealerships up.

Ms. TAMMY DARVISH (Vice president, DARCARS Automotive): What it all boils down to in the United States of America right now is if you get a UPS package in the mail, it's over.

KASTE: Even without the Chrysler franchise, they're not closing this dealership in Fairfax, Virginia. They say they'll still service Chrysler products, and there's always the used car business.

Martin Kaste, NPR News.

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