Chrysler Preps To Close Failing Dealerships
(AP Photo/Tony Dejak)
- 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.