Chrysler Eliminates 789 Dealers

14th May 2009

Chrysler today filed papers with the U.S. Bankruptcy Court to eliminate the franchise agreements of 789 (about 25%) of its dealers. In a conference call today, Jim Press, Chrysler President and Steven Landry, Executive VP, NA Sales and Marketing/Global Service and Parts outlined the transition. They said that the “rejected” dealers will be dealt with exactly the same through the end of their franchises, which will be June 9. Chrysler will assist with the redistribution of the 44,000 new vehicles on the lots to other dealers in the areas affected. They will also assist with the parts, if the dealers wish. The dealers will no longer be able to sell new Chrysler vehicles, but they will still be able to service vehicles. They will not be eligible for warranty work, though, as that work is reserved for franchised dealers.

There is no appeal process for dealers; however, the bankruptcy court has to approve the action.

Landry stated that the problem “is not too many dealers, it is too little industry.” Press reiterated this point, calling the dealers Chrysler’s partners and said this has been a very difficult decision.

The number of jobs lost as a result of this action is not known, because many of the affected dealers are dualed with competitive brands or will be combined with other Chrysler LLC dealers. Many also sell fewer than 100 units per year.

Every state except Alaska is affected by this action. Pennsylvania (53) and Texas (50) have the most and several others have over 30 each. 23 states have 10 or fewer dealers losing their franchises.

Chrysler says that while they are rejecting 25% of their franchises, those 789 only represent 14% of sales.