BREAKING: Chrysler 'rejects' 789 dealers nationwide, works to pare network by 25% by June 9
by Chris Paukert on May 14th 2009 at 1:00PM 
Chrysler has just announced that it will 'reject' some 789 of its dealerships by June 9 as it works to downsize through Chapter 11 bankruptcy restructuring. That represents a 25% cut in its dealer networks, leaving 2,392 Chrysler, Jeep, and Dodge dealers to carry on if the automaker is able to successfully emerge from bankruptcy with its new partner, Fiat.
Auburn Hills reiterated that it will be "business as usual" with its entire dealership body throughout its bankruptcy proceedings, with plans to honor warranty and incentive payments "during the period that rejected dealers remain active."
According to information obtained by Automotive News, individual dealers will learn whether they are rejected or accepted via UPS letters delivered this morning. At that point, dealer owners will have 23 business days for a 'court review' of their individual cases.
The same memo that disclosed the planned UPS letter disbursement also details that after the 789 dealers are rejected, 80% of its remaining dealers will carry all three of the company's brands (that figure presently stands at 62%). According to that communiqué, Chrysler does not expect for many of those dealers to close just because their franchise contracts are being rejected – about 345 of those rejected operations are paired with other competing brands, and according to Chrysler executive vice president of sales, Steven Landry, fully 83 percent of the disenfranchised dealers currently sell more used vehicles than they do new ones.
Thanks to the protections afforded under bankruptcy, Chrysler will not be legally required to buy back any vehicles, parts, or tooling from rejected dealers, but the automaker says it will work to pair the disenfranchised with remaining dealers who may be willing to buy those assets.
Chrysler vows to contact the more than 3.5 million customers who have purchased cars and trucks through the rejected dealers to give them additional information on how to get their vehicles serviced.
If you're wondering if your local Chrysler dealers are earmarked for closure, a complete PDF list is available by clicking here.
Official press release after the jump.
[Sources: Chrysler; Automotive News - subs. req.| Image: Scott Olson/Getty]
PRESS RELEASE:
Chrysler LLC Files Papers to Retain Majority of U.S. Dealer Network as Part of Company's Sales Process
Auburn Hills, Mich., May 14, 2009 - Chrysler LLC today filed a motion with the U.S. Bankruptcy Court seeking to reject certain U.S. dealer agreements, and a list of U.S. dealer agreements to be assigned to the buyer of its business assets. Subject to Court approval, 2,392 Chrysler, Jeep® or Dodge dealers will continue with the new company in a global alliance with Fiat once the sale is complete. This action will help improve the landscape of the Chrysler dealership network following the sale and enhance the full line portfolio of Dodge, Jeep and Chrysler products for customers.
"We are in the process of revitalizing Chrysler's business to succeed as a viable enterprise under new ownership in the future," said Jim Press, Vice Chairman and President. "The unprecedented decline in the industry has had a significant impact on our sales and forced us to reduce production levels to better match the needs of the market. With the downsizing of operations after the sale and reduction of plants and production, similar reductions must be made to the size of the dealer body. We appreciate the support of our dealers and regret this painful action. We wish market conditions made it possible to keep everyone."
Chrysler plans to maintain "business as usual" with all of its dealers through the transition. The Company intends to honor warranty and incentive payments during the period that rejected dealers remain active. Chrysler is committed to working with these dealers to ensure a positive relationship with customers. To ease the burden on dealers whose agreements have not been assumed, Chrysler will work to assist in the redistribution of new vehicles and parts to the remaining dealer network.
"It is with a deep sense of sadness that we must take steps to end some of our Sales and Service Dealer Agreements," said Steven Landry, Executive Vice President, North American Sales and Marketing, Global Service and Parts. "The decision, though difficult, was based on a data-driven matrix that assessed a number of key metrics. In total, 789 dealers, which represents 14 percent of our sales volume, will be rejected and, subject to the court approval, they will discontinue selling Dodge, Chrysler or Jeep vehicles on or about June 9.
"The review was an objective and rigorous process that was both thoughtful and thorough. We plan to work to have an orderly transition. These are extraordinary times, and they call for an extraordinary response. It is important to our dealers and to our customers that these steps be completed quickly and seamlessly as we transition to a new Chrysler," Landry added.
Additionally, on May 12, the Court approved the motion regarding Chrysler LLC's agreement with GMAC Financial Services to provide the automotive financing products and services to the Company's dealers and customers moving forward. GMAC Financial Services will be the preferred lender in North America for Chrysler, Jeep and Dodge dealer and consumer business, including wholesale of new and used vehicles as well as retail. GMAC Financial Services will be able to offer the best long-term finance options for Chrysler dealerships and customers and is established as a bank holding company with access to a variety of funding sources.
While difficult, the actions to restructure its dealer network are a necessary part of Chrysler's viability plan and are central to the proposed sale transaction. These actions will help ensure that both remaining dealers and the new company will be stronger and more profitable going forward.
"A stronger dealer network supported by GMAC's long-term finance options provides an advantage to consumers, and that is what will ultimately drive the creation of a significantly stronger global competitor," said Press.
Additional information, including the motions filed, can be found at www.chryslerrestructuring.com.
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Reader Comments (Page 1 of 4)
Harley Cook 1:06PM (5/14/2009)
All the Big 3 had to do was build cars that people really wanted to buy!
Reply
Aprime 1:06PM (5/14/2009)
Does the Big 3 include Toyota and exclude Ford?
Harley Cook 1:09PM (5/14/2009)
Toyota makes boring cars, imagine if they made something exciting!
Zax 1:16PM (5/14/2009)
They did, they were called SUVs, Minivans and Trucks.
The problems with Chrysler, GM and Ford go *much* deeper than "All the Big 3 had to do was build cars that people really wanted to buy!"
And this problem isn't solved by one solution either.
-Z
Sean 1:23PM (5/14/2009)
Are you serious? They DID. For DECADES. Look at the top 10 best selling cars for past years, it's been the Ford F-Series and Chevy Silverado since before 2000!
tew2281 1:37PM (5/14/2009)
I wonder how many more dealerships Chrysler anticipates loosing as a result of their bankrupcy? Between the ones they are rejecting and the ones they will loose due to people simply not buying, running 28% leaner might end up being 32-34% when its all said and done.
tump 3:24PM (5/14/2009)
I have to agree with Harley - they didn't build anything I wanted (almost got a Vette but got an Elise instead, but love the Vette - just too big for San Francisco (happy with my choice either way)). All those responding, you have to deduct ALL of those fleet sales numbers from your amount of cars you say "people wanted to buy".
Brent 1:06PM (5/14/2009)
Ever dealer on that list is closing????
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Frank 1:44PM (5/14/2009)
No. Some are dualled with antoher maker. Some can stay open as used car and maitnenance outlets. Some will pick up other franchisers. The rest will close. That's why youcan't take the 37,000 jobs lost statement at face value. Even stores that close down may shift come employees to other dealerships if they are part of a conglomeration. So it's bad to be sure, just not as bad as some are painting it.
But whatever it is now, it will be much worse when GM does this.
Tourian 2:46PM (5/14/2009)
You say maintenance yes, but warranty no. People who need warranty work on a ChryCo car will have to go to a dealer that still sells them new. That revenue is important to a dealer and Chryco won't allow an orphaned dealer to keep siphoning off the ones they keep.
And no, maybe you can't take the 37,000 jobs lost number at face value, but all those people won't necessarily be absorbed into the bigger dealer group. All dealers are hurting and won't necessarilly need more techs, salespeople, receptionists, title clerks, comptrollers, etc. They could just make do with the ones they have/have them work harder and use this as an opporutnity to let the others go.
Tool 3:21PM (5/14/2009)
Wow. It's amazing the New New New Chrysler actually did it.
That douche bag Jim Press -- who is the penultimate equivocator -- was telling dealers not to worry just last week.
Then today, Chrysler pulls the trigger and says "It isn’t that we have too many dealers, but we don’t have enough industry. There’s not enough business for the dealers that have high fixed and variable costs today.”
Are you kidding me? Talk about corporate spin. Time for some blunt talk: these dealers should have been 'rejected' years ago.
The New New New Chrysler should have cut even deeper. You can only do this once (unless a New New New New Chrysler declares chapter 11 again in the future) so they should have cut to the best performing dealers who are located in prime spots.
paul34 1:07PM (5/14/2009)
"Rejected dealers" just sounds so painful, lol.
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Jei 2:05PM (5/14/2009)
Awwww.....damn!!! That's a lot people outta work.
I can name a few that need to go, but there may be some that really shouldn't be closed even if they're connected with multiple brand dealerships.
I can imagine that many of the shops on the closure list will be able to still sell Chrysler vehicles as a dealer/retailer, but outside of a licensed contract with the manufacturer.
Wobbly_ears 1:09PM (5/14/2009)
I know I may be unreasonably harsh here. But I have no sympathy for car dealers. To me, most of them look like shysters. With their silky shirts & ties, their scammy ways of business & outrageous over the top ads that scream 'scam', I don't think many in the public feel too sympathetic to them. They have been burnt too many times.
Unlike rest of the civilized world where car prices are fixed (think of the Saturn & Scion pricing), here in America, buying a car is still like in the 1930s.
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Tagg 1:40PM (5/14/2009)
I don't know where you live but I've never seen a car salesperson in a silk shirt and many no longer wear ties. It's usally just business casual dress now. Some dealers are crooks but some are very good, just like anything in life. Many dealers have been around for decades and if they did what you claim most do there is no way they would exist, zero.
Just remember, car dealerships also provide many jobs to their local communities and pay more than their share of taxes to that community. Many support local little leauges and other youth sports and activities that are of great benefit to the commmunities in which they are based.
So I don't agree at all that the public doesn't feel sorry for them. If they don't they will in a month or so when tax revenue is way down, discounts on civic vehicles are gone and all the donations dry up.
Hellas 2:33PM (5/14/2009)
Ehhh...sorry to burst your bubble but car prices are NOT fixed in the rest of the world. Here in Canada where I live, you definitely can bargain from dealer to dealer and in Greece where I am from you never ever ever pay the asking price or your friends will hang you upside down from the Acropolis for all to see....
dukeisduke 1:19PM (5/14/2009)
Just wait until the lawsuits start flying. State franchise laws are generally written to favor the franchisees.
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sk 1:20PM (5/14/2009)
You can't sue a company that is in Chapter 11.
sk 1:19PM (5/14/2009)
Here in SE Michigan Monicatti Chrysler Jeep just started a TV ad campaign and now they are shutting him down. A nice example of throwing good money after bad.
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DiRF 1:20PM (5/14/2009)
Uh, it appears that *every* Chrysler Dodge or Jeep dealer within 50 miles of me is on that list... that's a bit ridiculous.
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