Chrysler Seeks To Slash 789 Dealerships

(CBS/AP)  Chrysler LLC wants to eliminate roughly a quarter of its 3,200 U.S. dealerships by early next month, saying in a bankruptcy court filing Thursday that the network is antiquated and has too many stores competing with each other.

The company, in a motion filed with the U.S. Bankruptcy Court in New York, said it wants to eliminate 789 dealerships by June 9. Many of the dealers' sales are too low, the automaker said. Just over 50 percent of dealers account for about 90 percent of the company's U.S. sales, the motion said.

Dealers, including Rep. Vernon Buchanan, R-Fla., were told Thursday morning through United Parcel Service letters if they would remain or be eliminated. The move, which the dealers can appeal, is likely to cause devastating effects in cities and towns across the country as thousands of jobs are lost and taxes are not paid.

"I'd like to know who made the decision and why they made the decision," James Anderer, a Jeep dealership owner in Lindenhurst, NY, told CBS News. "I've got single mothers, single fathers here … paycheck to paycheck. And I have to let them go?"

"It's an outrage. Stuff like this is not supposed to happen in America," he added.

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Listen to James Anderer's Interview With CBS News

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Chrysler spokeswoman Kathy Graham would not comment other than to say the company will notify dealers before speaking publicly. A hearing is scheduled for June 3 in U.S. Bankruptcy Court in New York to determine whether to approve Chrysler's motion.

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CBS News obtained a list of dealerships Chrysler is seeking to close from court filings. View the list here.

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Judges often rely on companies in bankruptcy to help determine what is in their best business interest, such as the closure of dealerships or cancellation of contracts.

Don Burk, co-owner of Heritage Chrysler Jeep in Ozark, Mo., said he found out that Chrysler plans to get rid of his dealership when he opened his UPS letter Thursday morning.

"Right now I'm processing the information," he said shortly after reading the letter. "I'm sure I'm going to get with my partner and we'll decide what to do from here."

The dealership, in a city of about 10,000 near Springfield, Mo., is involved in the community, sponsoring sports teams and even buying championship rings for the Ozark High School girls basketball team when it won the state championship several years ago, Burk said.

"If you're a good-sized business, kind of by default you're involved a lot," he said.

Chrysler dealerships aren't the only ones scheduled to get bad news this week. General Motors Corp. says it is notifying 1,100 dealers that it will not renew their franchise agreements when they expire at the end of September of 2010.

In its motion, Chrysler said it has many dealerships that sell one or two of its brands, with Chrysler-Jeep dealerships competing against Dodge dealers as well as other automakers' stores across the country.

"In addition, as suburbs grew and the modern interstate system continued to evolve, longstanding dealerships no longer were in the best or growing locations," the company said in its filing. "Many rural locations also served a diminishing population of potential consumers. Some dealership facilities became outdated. Other locations faced declining traffic count and declining populations."

Chrysler said in its filing that dealers are not competitive enough with foreign brands. Chrysler sold an average of 303 vehicles per dealer in 2008, according to its filing. By contrast, Honda Motor Co. sold about 1,200 vehicles per dealer, while Toyota Motor Corp. sold nearly 1,300 per dealer.

Chrysler said its dealer network "needs to be reduced and reconfigured in a targeted manner to strengthen the network and dealer profitability and to achieve optimal results for the dealers and consumers."

Chrysler has received $4 billion in federal loans and has been operating in bankruptcy protection since April 30. Its sales this year are down 46 percent compared with the first four months of last year and it reported a $16.8 billion net loss for 2008.

[valentin73]

There is NO such thing as an Independent Auto Dealer!!!!

All Dealerships are franchised through Headquarters in Detroit.

Ok, so the dealerships are closing; Where are people going to take their cars for
repairs. Who will honor the warranty??? No Toyota Dealer is going to accept
a Dodge vehicle as "trade in" possiblitity.

[mutnauq4842]

I want a car that will run for at least 150k miles with NO problems.
I don't want to pay more than $5k for it.

Chinese/Indian imports...here I come.
Posted by moderateminded44 at 9:18 AM : May 15, 2009

We had that in the past. Between unions and politics, so many tariffs were placed on the imports under the slogan of "Be American, Buy American". The result was that the good ol boys in the unions kept their high salaries, medical benefits and pension plans.

Someone, somewhere is going to figure a way to force price gouging on John Q. Public no matter who comes up with a cheaper way of doing things.

[golfered2]

I guess I don't understand this!!!!! The Dealers spent their own money to build a dealership, including hiring people and buying cars from Chrysler and GM. For this loyality they got letters telling them to screw themselves. Chrysler won't even buy back the cars these dealers have!!!! The GOVERNMENT AUTO TASK FORCE decides that the UAW should own 55% of Chrysler and yet it was the UAW that raped the company for the last 70 years and caused it's failure and the dealers who supported the company and worked hard to help the company succeed loses everything. This sounds like something that happens in Venezuela and not the USA

[burneb]

Americans so love a competitive dog-eat-dog market until they as individuals come out on the losing end, then somehow it is not fair.

Chrysler simply has more dealerships, especially those who do not carry their full line, than the present day market will support. These franchises do not directly cost Chrysler money, but indirectly the network size is expensive for them.

Every dealer contract allows an auto company to refuse renewal of a franchise they feel is no longer worth it to them. Some states have specific protections for franchise operators, but this is basically how my business school alma mater told us the free market works, for good and ill.

[cs4466]

Billions given free to the Duel passport holding AIG people while American Auto Makers are closing!

what is wrong with this picture?
Posted by didserve at 2:20 AM : May 15, 2009

Uhh the fact that you can't spell "dual"?

[truthislife1]

This is sad. Bailout money goes to the companies and the American people still lose.

[babooph]

What is the scam here-a "new" co selling franchises for "new" dealerships?

[Larry Fafarman]

The article never explained how it costs an automaker money to keep a dealership open. I thought that the dealerships were independent.

[hsudul]

Besides the fact that America is having areally bad economy.... I have a curious
obseravtion ...... Has it not occurred to car sellers of our nation that perhaps WE JUST
HAVE TOO MANY BRANDS ONTHE MARKET! Isn't there some point in time that mere
competition will not keep this industry afloat. I would love to hear some stories of the
autos which died and sent to auto heaven. What ever happened to our 1953 Packard
or the Nash Rambler maybe their demise could give us some insight to the current
industry.
Watch out there's another industry teetering on the brink. No matter how many
popluar and entertaining chefs they show on TV and magazines, the SMALL ELECTRICS
are in trouble. A popular TV celebrity with a line of cookware even new brides can't
afford..... George Forman with new expensive grilling machine.... like cars too many and
too few with truly impotant uses. I perused those depts and I was hard presst to find
a single person talk to.. Good stuff endures while new ones end up in a thrift store.

[moderateminded44]

Here's a couple of hints to Ford, GM, and Chrysler...really simple.

I want a car that will run for at least 150k miles with NO problems.
I don't want to pay more than $5k for it.

Chinese/Indian imports...here I come.