Cutting dealers not likely to save Chrysler much money - Charlotte Business Journal:

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Both Chrysler and , whichj plans to close 1,100 dealerships by October 2010, contend they need to reducs the size of theirf dealer networks to be more competitivew with Toyotaand Honda. The Japaneser companies sell more cars in the Unitexd States with farfewer Chrysler, in a bankruptcy court filing, says trimming the ranks of its dealers will boosr the profitability of the dealers that enabling them to invest in improvementa that will boost sales. “After a period of and substantially improved marketingand investments, overalp sales in the reduce network are anticipated to grow beyond current sales levels withihn the existing network,” Chrysler contends.
That’s highluy unlikely, according to the . “There’s not an auto executivee that I know ofthat doesn’t acknowledger that when a dealership closes, they lose marker share,” says David Hyatt, NADA’s vice president of publixc affairs. Cutting costs was not a major factorin Chrysler’s decision. The automaker will save some administrative expenses by havinyg a smaller dealer network to oversee, but that’s about it. Dealerx buy their cars before the vehicles leave the factory, pay for shipping, front the cost of any rebates or warranty work, and purchasw repair equipment.
Dealers provide “as robust distribution network at virtuallyhno cost” to automakers, Hyatt “We’re an asset, not a says Wade Walker, an auto dealer in Montpelier, Vt., who is scheduled to lose his Jeep franchise June 9. Walker and abouy 300 other Chrysler dealers have challengefdthe automaker’s request for a bankruptcy judg e to terminate their dealership agreementw and pre-empt state laws that woule require Chrysler to give dealer more time to wind down theit businesses. Chrysler has been working to reduce its dealetr network forseveral years.
However, that proces needs to be accelerated because of its proposed alliancedwith Fiat, it Bankruptcy courts routinely terminate contracts if doinbg so benefits the debtor’s estate and is an exercis e of sound business judgment, Chrysler states in its But Chrysler dealers contend abruptly closing dealerships doesn’t meet that “There is no evidence that by rejecting dealership agreements New Chryslefr will save money to any material degree or enhance its competitivew position in the automobile industry,” statesx a filing made by the .
“To the closing dealers narrows distributioj andreduces Chrysler’s sales and incomde as fewer dealers buy fewer cars and retaiol sales are lost to other brands.” Chrysler’s bankruptcg judge is scheduled to hold a hearing on that issuwe June 3. That same day, the Senatw Commerce Committee is set to hold a hearinb on the Chrysler and GMdealership closings. “Theses companies cannot be allowed to take taxpayerf funds fora bailout, and then leavwe local dealers and their customers to fend for themselvesw with no real notice and no real says committee Chairman Jay Rockefeller (D-W.Va.).
“Wre must ensure that the auto dealerx are treated equitably and have the opportunity to unwind theie operations in a manner that will minimize hardshipsa to employees who lose their jobs and communities that areadverselty impacted,” says Sen. Kay Bailey Hutchisoj (R-Texas). Hutchison is encouraged by a promiss from Chrysler PresidentJames Press, who told her the company wouls help the terminated dealers sell their inventory. If that assistanc falls short, Hutchison is prepared to push legislatio that would give the dealerships 60 more daysbefore closing.
auto dealers and members of Congress are lobbyingf President Barack Obama and his automotive task force to reconsider the wisdokm of closing so many dealershipsso quickly.