Chrysler Gets More Aggressive, Defending Dealer Cuts

(MoneyWatch)  Chrysler must be starting to worry about proposed legislation that would force Chrysler and also General Motors to reverse drastic cuts to their respective U.S. dealer networks.

Chrysler's vice president, network development and fleet, Peter Grady, yesterday posted an item on the Chrysler blog for journalists, thefirehouse.biz (which requires a password), defending Chrysler's methodology for picking which dealers to drop, and complaining that, "a lot of what's been said and written is wrong, or, at the least, misleading."

Grady didn't name any names, but for instance, U.S. Rep. Steve LaTourette, R-Ohio, a sponsor of a bill that would reverse dealer cuts, said in an earlier statement he didn't think Chrysler or GM had made the case that cutting dealers would save them money.

LaTourette also called the process "punitive and secretive."

In his blog item, Grady attempts to tackle both of those points. He said the 789 dealers Chrysler dropped cost Chrysler $33 million a year to support ordering, auditing, processing of payments, and other administrative services, plus another $150 million a year for marketing and advertising, over and above marketing funds the dealers contribute.

That's a little lame, considering that $33 million a year divided by 789 dealers is an average of less than $42,000 each. That's awfully small potatoes. Nor does Chrysler disclose how much offsetting revenue the dealers generated.

Grady also said the process of trimming the Chrysler dealer body is more than a decade old, and that dealers had plenty of input on how it should be done.

More to the point, Grady said that U.S. Bankruptcy Court Judge Arthur J. Gonzalez wrote that "no evidence" was presented in court that the dealer cuts were made "irrationally, such that the rejections demonstrate bad faith or whim or caprice."