Chrysler on Thursday afternoon (BST) said it had asked the US bankruptcy court for clearance to axe 789 US dealers and had also filed a list of US dealers whose agreements would “be assigned to the buyer of its business assets”.
Go deeper with GlobalData
“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, the automaker’s head of North American sales and marketing, global service and parts in a statement.
“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% of our sales volume, will be rejected…”
Subject to court approval, the dealers will stop selling Chrysler’s vehicles around 9 June.
“Subject to court approval, 2,392 [dealers] will continue with the new company in a global alliance with Fiat once the sale is complete,” the automaker added. “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.”
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData“We are in the process of revitalising Chrysler’s business to succeed as a viable enterprise under new ownership in the future,” said vice chairman and president Jim Press. “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 said it would maintain “business as usual” with all of its dealers through the transition and intends to honour warranty and incentive payments during the period that the axed (“rejected”) dealers remain active.
“Chrysler is committed to working with these dealers to ensure a positive relationship with customers,” the automaker added. “To ease the burden on dealers whose agreements have not been assumed, [we] will work to assist in the redistribution of new vehicles and parts to the remaining dealer network.”
“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.
Chrysler noted the court decision earlier this week approving GMAC Financial Services as the preferred lender in North America for its 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,” the automaker said.
“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,” added Press.
Dow Jones Newswires said some outlets had vowed to fight the proposal in court.
Citing the court filing, the news agency said Chrysler’s dealers had sold an average of 303 cars last year, compared with the 1,292 sold by each Toyota outlet.
The report said some dealers have questioned the methodology used by the company and Fiat in their decisions, and have vowed to battle the planned cuts.
A Michigan dealer whose facility is targeted for closure told Dow Jones he had around US$2m in inventory yet Chrysler told him it would not buy back any of the cars or parts.
The automaker has said its dealer contracts allow it to terminate its relationship for any reasons with 30 days’ written notice.
Soon after the dealer cut news broke, the US treasury was being quoted by US business TV channels as saying Chrysler’s restructuring plans were on track and that such progress would provide more security for the automaker’s employees.
Dow Jones also reported that about 1,000 GM dealers would receive letters tomorrow notifying them of their status as that automaker plans to cut about 2,600 of its 6,246 outlets.
Chrysler, GM, dealer cull seen starting today
