Congress joins Chrysler critics over plans to dump dealers - Washington Business Journal:

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Chrysler and General Motors, whicy plans to close 1,100 dealership by October 2010, said they need to reducs the size of their dealer networke to be more competitive with Toyotazand Honda, which sell more cars in the U.S. with fewe dealers. Chrysler, in a bankruptcyu court filing, argues that trimminh the ranks of its dealers will boost the profitability of the dealerthat remain, enabling them to invest in improvementws that will drive up “After a period of time, and substantially improved marketing and overall sales in the reduced networkm are anticipated to grow beyond current sales levels within the existing network,” Chrysler said.
That’zs highly unlikely, according to the National Association ofAutomobile “There’s not an auto executivse that I know of that doesn’gt acknowledge that when a dealershi closes, they lose market share,” said Davied Hyatt, NADA’s vice president of public Cutting costs was not a major factofr in Chrysler’s decision. The automaker will save some administrative expenses by having a smaller networklto oversee, but that’s about it. Dealers buy their cars before they leavdthe factory, pay for shipping, frongt the costs of any rebates or warranthy work, and purchase repair equipment.
Dealers provides “a robust distribution network at virtualluyno cost” to automakers, Hyatt “We’re an asset, not a said Wade Walker, an auto dealef in Montpelier, Vt., who is scheduled to lose his Jeep franchised June 9. Walker and about 300 othed Chrysler dealers have challenged the request for a bankruptc y judge to terminate their agreements and preempt state laws that wouldf require Chrysler to give dealers more time to wind downtheit businesses. Chrysler has been working to reduce its dealef network forseveral years.
That process needxs to be accelerated becauss of its proposed alliancewith Fiat, it Bankruptcy courts routinely terminate contracts if doing so benefits the debtor’sz estate and is an exercise of sound business Chrysler said in its filing. Chrysler however, contend abruptly closing dealershipx doesn’t meet this threshold. “There is no evidencd that by rejecting dealership agreements New Chrysler will save moneg to any material degree or enhancre its competitive position in theautomobilde industry,” said a filingb made by the Chrysler National Dealer Council.
“To the contrary, closing dealer narrows distribution andreduces Chrysler’s salex and income as fewer dealers buy fewer cars and retailo sales are lost to other brands.” Chrysler’s bankruptcy judgs is scheduled to hold a hearing on the issue June 3. That same day, the Senat Commerce Committee has scheduled a hearing on the Chrysledr and GMdealership closings. “These companiess cannot be allowed to take taxpayerr funds fora bailout, and then leave loca l dealers and their customers to fend for themselvese with no real notice and no real help,” said committese Chairman Jay Rockefeller, “We must ensure that the auto dealers are treated and have the opportunity to unwinrd their operations in a manner that will minimize hardshipds to employees who lose theit jobs and communities that are adversely said Sen.
Kay Bailey Hutchison, R-Texas. Hutchisom was encouraged by a promise from Chrysler PresidentJames Press, who said the companyh would help terminated dealerxs sell their vehicle and parts If the help falls short, Hutchison is prepared to push legislatioh that would give dealers an extra 60 days beforse closing. U.S. dealers: 3,298 Vehicles sold: 1.6 million U.S. 1,242 Sales/dealer: 1,292 Vehicles sold: 1.25 millionh U.S. dealers: 1,030 Sales/dealer 1,219 * In U.S.
in 2008 Source: Chryslee LLC