General Motors and Chrysler collectively plan to axe up to 3,000 US dealers and are expected to begin sending notifications out as early as today (14 May), media reports said.
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GM was expected to send termination notices to up to 2,000 dealers – a third of its roughly 6,000-strong US network – “three people briefed on the still developing plans” told Reuters.
Chrysler, which filed for Chapter 11 bankruptcy protection on 30 April, will also tell up to 1,000 of its 3,189 US dealers it is terminating their franchise agreements, according to the anonymous news agency sources.
Citing media reports, US auto trade publication WardsAuto.com today said Chrysler was planning to terminate as many as 800 dealer franchise agreements on Thursday, even as company officials insisted the automaker was not ready to announce plans to reduce its dealer count.
Court documents filed late last week appear to contradict both accounts, Wards added.
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By GlobalDataIt noted that New York bankruptcy court judge Arthur Gonzalez, overseeing Chrysler’s bankruptcy, has ruled the automaker must file a preliminary list with the court today, naming valuable dealers it plans to move to a new company to be created with Fiat Auto, once Chrysler emerges from bankruptcy.
Chrysler must submit a list to the bankruptcy court and inform its dealers of their status at least 13 days prior to its assets sale hearing scheduled for 27 May, WardsAuto.com said.
It noted that Chrysler vice chairman and president Jim Press had told dealers in a conference call last Friday the automaker did not know who, how or when a dealer reduction would occur. Nor did Chrysler executives know how many dealers would move forward with the new company.
“We do not have a finalised plan yet,” he said. “As soon as we are in a position to announce these activities, we will do that.”
Wards suggested this could indicate Chrysler would file a motion today asking the court to push back the date of the sale hearing, giving it more time to assemble its dealer list.
It had reported last week the list would not be final, which meant dealers likely would move on and off. According to court documents, a final list was due in court 30 days after the preliminary document was submitted.
The latest developments came as dealer representatives stepped up lobbying in Washington to try to slow down closures they estimated would cost 200,000 jobs, Reuters reported.
The involuntary terminations were also widely expected to prompt a legal challenge from dealers who are independent retail networks protected by state franchise laws, the news agency added.
Chrysler spokeswoman Kathy Graham told Reuters the automaker had not announced its dealership closure plans, apparently confirming what Press had earlier told Wards.
“We have not announced anything at this point,” she said. “We are not done with our process at this point.”
According to the news agency, over 100 members of the National Automobile Dealers Association (NADA), representing 20,000 new car dealers, met members of the House of Representatives and Senate in Washington on Wednesday, asking them to intervene with the Obama administration’s autos task force on planned reductions.
“A rapid cut of dealers is a bad idea,” NADA chairman John McEleney said in a statement. He added his organisation does not oppose dealer consolidation, but believes the administration and the companies are moving too fast.
The NADA leaders are scheduled to meet the auto task force later today.
The task force’s earlier instructions to GM and Chrysler included reducing the number of dealers to boost both automaker and retailer viability long-term.
GM and Chrysler have faced pressure to cut struggling dealerships to bring their large sales networks line with those run by more successful rivals led by Toyota which has only about 1,200 dealerships in the US, Reuters noted.
It added that Chrysler was using the bankruptcy process to move faster toward the goal while GM planned to tell dealerships they were being dropped for not meeting standards for capitalisation and profitability.
GM wants to cut its dealer network to 3,605 from over 6,246 at the end of 2008 but has not specified how it would achieve that, how many dealerships would be involuntarily terminated and how many it expected to go bankrupt or shut down on their own, the report added.
GM CEO Friz Henderson told reporters on Monday the automaker was completing its plans for dealership consolidation this week.
Meanwhile, Chrysler CEO Bob Nardelli told staff in a Tuesday memo, a copy of which was cited by Reuters, that the automaker would determine how to organise its dealer networks during the rest of the week.
A Houston Chevrolet dealer, one of 100 who lobbied lawmakers in Washington, told the news agency a rapid wind down of outlets could lead to a flood of new vehicles hitting the market simultaneously at much lower prices, further undercutting already hard hit dealers.
“Dealers are not cost. What we are are retail and distribution,” he added.
Late breaking: Chrysler to axe 798 dealers
