Fiat Boss Marchionne Complains About Stubborn Chrysler Dealers -- To a Dealer Group

Last Updated Apr 1, 2010 8:45 AM EDT

Fiat boss and Chrysler CEO Sergio Marchionne isn't prone to admit mistakes or regrets, but a few days ago he did acknowledge that 800 dealers Chrysler wants to terminate -- so far, with only mixed success -- have become a thorn in his side. Oddly enough, he chose a conference co-hosted by the National Automobile Dealers Association to unburden himself on this subject.

Even more oddly, he got a sympathetic hearing, all things considered.

"It creates an additional level of uncertainty," he said of the dealer situation at a March 30 conference also co-hosted by IHS Global Insight. Otherwise, Marchionne insisted his five-year plan to get Chrysler profitable again is on track. He acknowledged that many people think the Chrysler plan is far too optimistic, but he insisted he can pull it off, based on his experience at Fiat.

"In 2004 when I arrived in Fiat ... (the press said) the plan was 'as impractical as it was optimistic.' In 2008, Fiat had its highest trading profit in its 111-year history almost $5 billion," he said.

Chrysler announced in June 2009 that effective immediately, it was terminating close to 800 dealers, or about 25 percent of its U.S. total, as part of its bankruptcy restructuring. General Motors did the same thing only more so, identifying about 2,600 dealerships GM wanted to get rid of by the end of this year, or about 40 percent of its U.S. total.

What actually happened was that at the urging of friendly members of Congress and auto dealer groups including NADA, Congress in effect compelled Chrysler and GM to reconsider the terminations of dealers who demanded arbitration.

GM recently announced it was reinstating 661 dealers. Marchionne said that Chrysler recently agreed to settlements that would reinstate 50 dealers, bringing to 86 the total number so far that Chrysler intends to reinstate.

Marchionne complained yesterday, "I thought that issue had been put to bed on June 10 (2009) ... It is something that has really slowed us down."

Considering that NADA was a co-host, Marchionne's complaints about dealers got a sympathetic hearing.

That's because many of the most prosperous dealers with lots of franchises agree that Chrysler was right about having too many dealers. They also don't mind if Chrysler gets rid of some weaker dealerships, even if in some cases Chrysler terminated some of their own stores.

AutoNation Chairman and CEO Mike Jackson, for instance, last year publicly applauded Chrysler and also General Motors for cutting their retail networks, even though it cost AutoNation (AN) a handful of stores out of more than 100.

Jackson was a moderator at the IHS/NADA conference. He asked Marchionne whether had could report any pleasant or unpleasant surprises at Chrysler. In answer to the question, Marchionne said the dealer situation was an unpleasant surprise.

Unlike the "haves," some "have-not" dealers with single stores in smaller markets bitterly resent the Chrysler dealer cuts. Those dealers were not likely to take a few days away from daily business and come to the New York conference and this week's New York auto show. And that helps explain the calm with which the audience received Marchionne's critical remarks.