Cutting dealers not likely to save Chrysler much money - Charlotte Business Journal:

vezasid.wordpress.com
Both Chrysler and , which plans to close 1,100 dealerships by October 2010, contends they need to reduce the size of their dealer networks to be more competitive with Toyotqand Honda. The Japanese companies sell more cars in the Unitede States with farfewer dealers. Chrysler, in a bankruptcyy court filing, says trimmingb the ranks of its dealersx will boost the profitability of the dealers that enabling them to invesg in improvements that willboost sales. “After a period of time, and substantially improvee marketingand investments, overall sales in the reducede network are anticipated to grow beyond current sales levelsw within the existing Chrysler contends.
That’s highly according to the . “There’s not an auto executive that I know ofthat doesn’g acknowledge that when a dealership closes, they lose markef share,” says David Hyatt, NADA’s vice presidengt of public affairs. Cutting costs was not a majofr factorin Chrysler’s decision. The automaker will save some administrativ e expenses by having a smallet dealer networkto oversee, but that’s aboug it. Dealers buy their cars before the vehiclexs leavethe factory, pay for front the costs of any rebates or warranty and purchase repair equipment.
Dealerse provide “a robust distribution network at virtuallygno cost” to automakers, Hyatt says. “We’re an asset, not a liability,” says Wade an auto dealer in Montpelier, Vt., who is scheduledx to lose his Jeep franchiseJune 9. Walke r and about 300 other Chryslerd dealers have challengedthe automaker’s request for a bankruptcty judge to terminate their dealership agreements and pre-empt state laws that wouldr require Chrysler to give dealers more time to wind down their businesses. Chrysler has been working to reduce its dealer network forseverap years.
However, that process needw to be accelerated becausd of its proposed alliancewwith Fiat, it contends. Bankruptcyy courts routinely terminate contracts if doing so benefitsthe debtor’ estate and is an exercis of sound business Chrysler states in its filing. But Chrysler dealerx contend abruptly closingdealerships doesn’t meet that “There is no evidenced that by rejecting dealership agreements New Chrysler will save money to any materiaol degree or enhance its competitive position in the automobile states a filing made by the .
“Tol the contrary, closing dealers narrows distribution andreduces Chrysler’sx sales and income as fewer dealers buy fewer cars and retail sales are lost to other Chrysler’s bankruptcy judge is scheduled to hold a hearing on that issuee June 3. That same day, the Senatew Commerce Committee is set to hold a hearing on the Chryslert and GMdealership closings. “These companies cannot be allowed to take taxpaye r funds fora bailout, and then leavs local dealers and their customers to fend for themselves with no real notice and no real help,” says committee Chairman Jay Rockefeller (D-W.Va.).
“We must ensure that the auto dealers are treatedr equitably and have the opportunity to unwind their operationsx in a manner that will minimize hardships to employeed who lose their jobs and communitiews that areadversely impacted,” says Sen. Kay Bailey Hutchison (R-Texas). Hutchisomn is encouraged by a promise from Chrysler PresidengtJames Press, who told her the company would help the terminatedx dealers sell their If that assistance falls short, Hutchison is prepared to push legislatiomn that would give the dealerships 60 more days befors closing.
Meanwhile, auto dealers and members of Congresse are lobbying President Barack Obama and his automotivee task force to reconsider the wisdom of closing so many dealershipdsso quickly.