Chrysler to Eliminate Nearly 800 Dealerships
By slashing 25 percent of its dealer network, the restructured Chrysler-Fiat will eliminate up to 40,000 jobs or more than Chrysler's total U.S. work force.
In a court filing Thursday, Chrysler asked U.S. Bankruptcy Judge Arthur Gonzalez to reject dealer agreements for 789 dealers throughout the U.S. in an effort "to conserve cash and pursue transactions that maximize value."
Chrysler has signaled its intent to shrink its retail network since filing for Chapter 11 bankruptcy protection on April 30. In 2008, Chrysler's 3,298 dealers sold on average 303 vehicles per showroom, compared with 1,292 for the average Toyota dealer and 1,219 for the average Honda dealer.
"Such larger throughput supports substantially higher average profits, enables dealerships to invest in facilities and other operations and enables competitors to attract the more experienced and highly qualified personnel," said Peter Grady, Chrysler director of dealer operations.
Grady said in a court filing that about 25 percent of Chrysler's current 3,200 dealers account for about 50 percent of the company's U.S. sales. Just over 50 percent of the dealers account for 90 percent of Chrysler's U.S. sales.
"Chrysler's larger dealer network also substantially increases expenses and inefficiencies in the distribution system," Grady said, "forcing Chrysler to spend additional resources on training ... processes, oversight of the dealer network, auditing and monitoring expenses."
Grady described the rejection of nearly 800 dealer agreements as an acceleration of Chrysler's Project Genesis, which has resulted in consolidation of hundreds of Chrysler-Jeep and Dodge dealerships under one roof. From 2001 to the end of April of this year Chrysler has reduced its dealer network from 4,320 to 3,188.
Rejected dealers will have until May 26 to file objections to this motion. Gonzalez will hold a hearing on the matter June 3.