And so it begins: Affected Chrysler dealers prepare suit
Click above to view and explore Chrysler's dealer rejections nationwide and in your town
The consequences of the Obama Administration's hope for New Chrysler to emerge from bankruptcy as quickly as possible will be felt by the 789 dealerships being shut down by the automaker on June 9th. According to a statement filed by Stephen Lerner, an attorney representing the Committee of Chrysler Affected Dealers:
"Chrysler's proposed asset sale and request for immediate termination of the dealer franchises will destroy several hundred independent businesses, ruin the livelihoods of their owners, cause the loss of thousands of jobs and precipitate inevitable personal and business bankruptcies."There's probably a lot of truth in that statement. As Ford Veep Jim Farley said, "You don't orphan four million customers overnight without some fallout." Still, none of this changes the fact that Chrysler needs to shed a large portion of its network of dealerships to ensure viability moving forward.
Says bankruptcy attorney at Mintz Levin, "The beauty of Chapter 11 is that you can accomplish these things that would be very difficult outside of Chapter 11." Somehow, we'd guess "beauty" isn't the word Chrysler's affected dealers would use, and we're interested to see how it all plays out in court.
[Source: Automotive News - Sub. Req.]
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Reader Comments (Page 1 of 2)
David 2:10PM (5/20/2009)
i still dont reply understand why they need to shed dealers. chrysler doesn't own them, and if they're still profitable, who cares? the money losers shutdown naturally and that doesn't cost chrysler money.
i know toyota sells way more cars per dealer, but again, who cares? this will only result in less cars sold overall.
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Len_A 3:06PM (5/20/2009)
Even though Chrysler doesn't own the dealership, there are several ways that more dealers than needed cost Chrysler money. One, more dealers mean more field personnel in the form of zone reps, and parts and service reps, calling on the dealers. Two, more dealers increases the logistics costs in distributing both cars and service parts. Three, more dealers increases Chrysler internal costs related to tracking warranty payments, hold backs, rebates, etc.
Then there's the intangible costs - too many of the same dealership close to each other, and customers play them off against each other for better price, driving down the value of the brand and helping depreciate the faster. Lower sales per dealer mean the dealerships don't have the money to put back into the dealerships, so the brand's image suffers. None of this would be a problem if the dealers sales were better, but at least half of these 789 dealers sold less than 100 new cars last year. That's not even 2 per week.
Tourian 3:12PM (5/20/2009)
The fact is, profitable dealers maintain better trained staff, have better facilties, and above all else order more new cars then poor dealers who fight over crumbs in an oversaturated market.
John 3:27PM (5/20/2009)
"the money losers shutdown naturally and that doesn't cost chrysler money."
But that would fall under a capitalistic idea of "supply and demand", a concept this current administration knows nothing about.
RockStoneSteel 11:21PM (5/20/2009)
I agree. No one (including the replies here) has adequately explained why dealers must be cut so radically and how that saves Chrysler money or serves the customers at all. The numerous personal and dealer bankruptcies, as well as lawsuits, will more than negate any benefits to the manufacturer. Natural attrition will take care of this "problem" of too many dealers if it is indeed a problem. It's unfortunate that our government is so callously and stupidly picking and choosing the winners in this game. Same goes for GM and its debtors.
At the beginning, I thought it was a good idea to loan the manufacturers money to buy them time through this rough economy and their pathetic product line ups, but I'm changing my mind. The governments micromanagement of the dealer cuts, product line ups, and the rather immediate increase in fuel economy standards pretty much guarantee they are doomed long term.
Todd 2:11PM (5/20/2009)
Sounds like 789 people need to go look up the word bankruptcy in the dictionary!
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inteller 3:21PM (5/20/2009)
yeah, they pitch a nice sob story, but sympathy gets you no where in bankruptcy court.
Yaroukh 2:15PM (5/20/2009)
typo in the title
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Franz 2:18PM (5/20/2009)
Caught between a rock and an even bigger rock. Shut down some dealerships now to ensure the future of the company or keep 'em all and risk tanking. Not entirely knowledgeable on all the intricacies of Chrysler's predicament but one thing's for sure: It's a sticky situation to be in.
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jerry lipke 2:19PM (5/20/2009)
It's gotten so bad that you guys can't even spell Chrysler on your opening headline !!!!!!
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RandomNess 2:25PM (5/20/2009)
There's no need to remember how to spell Chrysler correctly anymore. We all know it's a dead already. Might as well free up some brain space with things that are actually going to be around.
John 2:19PM (5/20/2009)
I'm sure in the end the government will give them some kind of "tax credit" for shutting down, a.k.a. more handouts and more future taxes.
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Big Mola 2:31PM (5/20/2009)
People want to fix broken companies, except when doing so affect themselves adversely. (This applies to unions, execs, shareholders, bond holders, you, me, that jerk back there, etc.)
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Coolio 2:37PM (5/20/2009)
Maybe Obama will realize what a $hit$torm this is and not let it happen again when it really matters (i.e. GM).
Sam Watson 2:38PM (5/20/2009)
For all the talk of the recession slowing & turning, I still can't shake the idea that even harder times are ahead when the pain of Chrysler & GM (likely) bankruptcy come to town. I know we have several *large* dealerships closing in my mid-sized capitol city. That is a lot less tax money (sales, income, luxury, car tags) for the city / county / state. The fallout is going to be very very ugly.
I also think it is going to hurt local advertising agencies & tv crews who create all the spots too. Cars are one of the biggest advertisers in local markets other than hospitals & banks.
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Jason 4:49PM (5/20/2009)
But how many more *large* dealerships are left afterwards in your mid-size capitol city? If they're closing "several" such larger dealerships I have to think that either A) you had too many Chrysler brand dealerships in the area to start with or B) "large" as they may be they weren't moving very many Chrysler brand vehicles.
In our area there's one effected dealership, and it was a small Chrysler/Jeep/Kia dealership. The company that owns that dealership also owns a full line Chrysler/Dodge/Jeep dealership "in town" as well as another full line dealership in a neighboring city (neither of which were "rejected"), plus other dealerships for Chevy, Subaru, Hyundia, and Kia across 3 cities.
Erik 2:40PM (5/20/2009)
These people are wasting their time. You can't draw blood friom a stone.
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fixitfixitstop 2:41PM (5/20/2009)
D.I.A.F.
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Farris 2:52PM (5/20/2009)
1. You don't have to put spaces in links in these comments.
2. GTFO. We don't care about your website.
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JMF 2:53PM (5/20/2009)
The more dealers they close - the more people will buy other brands including more imports.
To think customers will drive further to buy a car or truck from another Chrysler / Fiat dealer (& Fiat is a company with less of a brand identity than Hyunday or Kia in N.A.) even further away in another town or city, is a recipe for yet another bailout to continue to pay the same corporate idiots who got it there in the first place.
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