UPDATE: Chrysler Targets 25% Cut In US Dealer Network
14 Mai 2009 - 6:51PM
Dow Jones News
Chrysler LLC (C.XX) revealed plans Thursday to cut a quarter of
its U.S. dealer network, though some outlets vowed to fight the
proposal in court.
The company has requested a June 3 court hearing to approve the
planned cull of 789 of its 3,188 nationwide dealers by June 9.
Chrysler's North American sales and marketing chief Steve Landry
said the affected dealers represented about 14% of its total sales
by volume.
"We will have a more profitable network going forward," Chrysler
Vice Chairman Jim Press said in a conference call Thursday. "There
are no winners or losers here. It is what it is."
Chrysler said the dealer decisions were its own and not driven
by Fiat SpA (FIATY) or the U.S. Treasury, which is providing the
company with emergency loans.
The company and prospective partner Fiat are using the
bankruptcy process to drive the cull in a dealer network seen as
bloated and less efficient than overseas rivals.
A patchwork of state laws made trimming the distribution network
more difficult outside of Chapter 11.
Urban dealers are particularly hard hit by the planned cuts,
reflecting demographic changes that have reduced inner-city
business.
Competitors such as Toyota Motor Co. (TM), which entered the
market later, positioned themselves in the suburbs and didn't have
to contend with those dealerships that were no longer strong
sellers.
Chrysler said its dealers sold an average of 303 cars last year,
compared with the 1,292 sold by each Toyota Co. outlet.
The U.S. company will assist in the redistribution of new
vehicles and parts to the remaining dealer network. It won't
buy-back any inventory or parts from dealers that will close.
Some Chrysler dealers questioned the methodology used by the
company and Fiat in their deliberations, and have vowed to battle
the planned cuts.
Landry said the decision was made on a "data-driven" matrix. He
didn't offer specifics.
Leo Jerome, owner of Story Chrysler Jeep in Lansing, Mich., and
targeted for closure, said he has about $2 million in inventory and
Chrysler informed him that the company will not buy any of the cars
or parts back.
Chrysler, which filed for bankruptcy protection April 30, warned
that it would need to trim its dealerships to cut costs and boost
profitability.
The auto maker said all of its dealer contracts allow the
company to terminate its relationship for any reasons with 30 days
written notice.
Chrysler said it sold 1 million cars and trucks through its
3,298 dealers in 2008.
General Motors Corp. (GM), attempting to avoid bankruptcy
protection, is also planning to cut dealers. About 1,000 GM dealers
will receive letters Friday notifying them of their status. GM is
planning to cut about 2,600 of its 6,246 outlets.
AutoNation, Inc. (AN), the largest U.S. auto dealer, said in a
statement that it supports Chrysler's move, noting those of its own
outlets targeted for closure accounted for 1% of its operating
income last year.
-By Jeff Bennett; Dow Jones Newswires;
jeff.bennett@dowjones.com; 248-204-5542