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Econwatch
May 13, 2009 3:05 PM

Chrysler Preps To Close Failing Dealerships

By
Dean Reynolds
Topics
Automakers
(AP Photo/Tony Dejak)
As perhaps as many as 800 Chrysler dealers across the country wait for the bad news, it may be helpful to consider these facts about the ailing automaker:



  • Despite losing 400 dealers since early last year, Chrysler still has too many showrooms too close together, especially in cities. Merging them would leave nicer and better-staffed franchises which would be more profitable, at least in theory.


  • The criterion being used for deciding whether a franchise will close or stay open involves whether sales goals were met (can you imagine what goals were set much less met?) Profits, if any, will be a factor too, along with the condition of their facilities and whether they have all three Chrysler brands (Chrysler, Dodge and Jeep) under one roof.


  • Up to 800 of 3,200 dealers will get the bad news otherwise known as "rejecting franchise agreements." That's a quarter of Chrysler showrooms around the country. Thought of another way, it means that probably 50 percent of the Chrysler dealers in big urban areas will be closing. There apparently are way too many Chrysler dealers in the Northeast.


  • You can see the problem more clearly when you realize that Chrysler gets 90 percent of its sales from 50 percent of its dealers, according to bankruptcy documents currently on file.


  • In many parts of the country, dealerships have been family-run businesses for generations. Many are heavily involved in their local communities, sponsoring little league baseball, charity events etc. And they pay hefty sales taxes to their municipalities. Speaking selfishly, auto dealerships are also a source of advertising revenue to radio and television stations, and especially newspapers. You will feel that when watching your local baseball team without commercials for Big Bob's Autopark, or whatever. Chrysler has already cut its nationwide advertising in half.


  • Keep in mind that Chrysler remains on life support thanks to its pending merger with the Italian automaker Fiat. And among other things, it means that Fiat – not Chrysler – will decide which dealers stay or go. Those decisions will be made in Turin, Italy – not Detroit, Michigan.



Dean Reynolds is a CBS News correspondent based in Chicago.

  • Dean Reynolds

    Dean Reynolds is a CBS News National Correspondent based in Chicago.

Add a Comment See all 56 Comments
by swin5 May 18, 2009 4:01 PM EDT
Eliminate ALL the dealers and sell the cars on-line direct from the manufacturer. Who likes a car salesman anyway? They get paid from your hard-earned money, they add no value to the product, and more often than not they don't seem to know anything about the product they're selling anyway.
Reply to this comment
by honestindividual May 14, 2009 11:34 PM EDT
Wow! All this Chrysler stuff sure got people worked up, huh? Well, just wait until tomorrow (Friday), when GM posts its' list of dealers that are going away. Instead of 25% like Chrysler, GM is going to cut 40% in short order. Rather than whining about a done deal, which it is, why not learn from it and if you need a new car, buy a competitive brand that will have some residual value in a few years? I saw a news story today that said the value of a 3-year-old Chrysler fell more than 6% in just one week, after the bankruptcy announcement was made, and that value stands at just 28.8% of the cost new! I've owned dozens of German cars and never had a 3-year-old one with a market value of less than 50% of what I paid for it new; usually got 60% to 70% back. Geez...it's so simple! Look in the newspaper! Oldsmobile was wholesaling new Aleros for $3,995 in 2004; what do you THINK is going to happen to the value of Pontiac G-6, etc., etc.???
Reply to this comment
by dfnj2009 May 14, 2009 10:05 PM EDT
Check out this new car that gets 100 miles per gallon:

http://www.spira4u.com/

Just amazing!
Reply to this comment
by upsetamerican May 14, 2009 9:50 PM EDT
Having sat back and taken all this information in about goverment "handouts" to 'bailout' corp. america i've just got to sit back and laugh. One of the first problems is if you look at the dodge/chrysler/jeep web sites and count up the number of diffrent models they sell on top of all the other brands with how many diffrent models the first way to cut costs is to cut back the number models offered. simple!! The next big problem is exactly how much do the suit and ties with all the big titles make a year?? I work for a company that the CEO was making a very high six figure income then the company was sold to private investors whom kept the CEO, still pays a GOOD salary, and they got a bonus from the sale. (can we say AIG??) How much does the UAW fight for on a regular basis?? No wonder jobs are being shipped elsewhere. Now I am not for shipping jobs overseas, etc. but there is a time and a place to sit back and say 'ok i've got to scale back my way of life and maybe take a cut in pay or I won't have a job at all' (remember exgovener of PA going to the Head of Homeland Security only to quit because he stated he couldn't live on a six figure paycheck because he had children in college??) Let some of these top CEO/COO/ etc try to live like the average joe and guess what, you'd see so may changes in how things were run in the USA your head would just spin!! Now this is just my thoughts, but, they sure do seem to make sence in the long run.
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by globalcoolin May 14, 2009 3:04 PM EDT
It has to be as Obama was going around spewing socialist "values" and being applauded enthusiasticly,some of the auto dealers loseing their jobs had to be in that crowd.
Not as skeptics!
But as enthused!
Car dealer! Learn that when you were working, the socialist mean THAT as the rich ripping everyone off. When you were working THAT was in the way of "fairness" for America's poor.
Your' working was that which needed "regulated" because your job was not "regulated" enough!
Now you can do what's APROVED of by socialists....go participate in a government program--like un-employment.
So now you'll be regulated enough to make the socialists happy! You've had the capitalist running dog lackey regulated out of you, now!
So, applaud you superior, enlightened regulated human being! You're a socialist by the miracle of believing the lies! And applauding the lies and those who lied them! For the betterment of man kind.
Medicle professionals!
YOU'RE NEXT!
Reply to this comment
by dfnj2009 May 14, 2009 10:33 AM EDT
What the heck are our politicians doing!! Change tax laws or pass new ones to create incentives for investing and creating jobs in the USA. Our politicians better start waking up. The next time 2,000,000 people gather in DC it will not be as peaceful. This country is a powder keg. They better bring the military home before the riots begin!
Reply to this comment
by Dgunner May 14, 2009 8:23 AM EDT
Gm is still in business? funny I thought after 68 when they built a real auto and truck they sold out to the UAW and started thier new pension line to support thier retirees. Parts were the main stay for Gm after 68 just like micro-soft now.
Reply to this comment
by azfalcon May 13, 2009 11:32 PM EDT
Sky_Five you are really a few years behind the times.

but its really about how much you have left to spend that counts.
Posted by azfalcon
.
The American automakers thought the same thing. They cut costs everywhere they could, unfortunately it was in the wrong places. Quality and reliability went out the window, it was all about the bottom line. Look at them now.

I will grant you that the perception is that the Japanese manufacturers have better quality... and for good reason... for many recent years they have had. But. and a big BUT. they don't now. They still have the 'perception' of having better quality - but they are really only equal to most domestic brands.

Just as the Japanese brands had to overcome the perception that 'Made in Japan' meant junk in the 50's, 60's, 70's, and 80's, now the American brand has to overcome the same belief.

The early adopters in the 80's benefited from buying Japanese vehicles (at a huge discount) when much of America was incorrectly still calling their product 'junk' and they continued to benefit in the 90's and into the new century. The late adopters started buying Japenese in the 90's (or later) and will continue to do so for years to come, while the early adopters move to domestic brands because they now are the better value.

Both brands go 200K plus miles today without significant problems - fifteen years ago that was not the case for American brands... but it is today. Competition has made both better - but made American brands better faster because they were behind. Now American brands are priced 15-30% under the Japanese brands - and with similar quality that makes the early adopters the winners (once again) by picking the lower priced comparable quality vehicle. And I understand why you can not recognize that for a few more years. You didn't buy Japanese in the late 60's and early 70's when they were comparable - you probably did not buy them in the 80's when they were superior - you started buying them in the late 80's to after year 2000 when they were clearly superior - and now that the worm has turned - you will need 20 years of proof until you recognize this. You are a late adopter.
Reply to this comment
by azfalcon May 13, 2009 10:57 PM EDT
"to azfalcon

beleve it or not some people drive 70 miles per hour 60 to 70 miles per day back and forth to work and make 30 dollers per hour everyday, even in Indiana. Maybe you should go to school and get a real job.
"
Thank you for the added data and clarification. I live six blocks from my office and I walk there. I am a statistician and business analyst... my job is to find waste and ineffciencies and remove them from our production stream.

Have you given any thought to moving closer to your work? Or, working closer to where you live? Under ideal conditions you spend an hour of your time getting to work and another hour to get back home. Much more in bad weather. Your $30 an hour is really $20-24 an hour when you factor in just your driving time - and about $3.96 an hour less than that for vehicle expense (based on gov't mileage expense costs)

So.... you make between $16 and $20 an hour after subtracting your inputs to earning that $30 an hour. Then you pay income tax based on $30 an hour - and Social Security - and all the rest. You should be able to take a job that you can walk to - or take a bus to - that would pay you $12 an hour and still have as much (or more) money left to spend when compared to what you are doing now. I understand the need to brag about making $62K a year - but its really about how much you have left to spend that counts.
Reply to this comment
by gizmosis224 May 13, 2009 10:47 PM EDT
Is anybody listening? We NEED jobs to stay in the USA!
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