Cutting dealers won

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Chrysler and , which plan to close 1,100 dealerships by October contend they need to reduce the size of their dealer networksd in order to be more competitivs withand , which sell more cars in the U.S. with a lot fewerr dealers. Chrysler, in a bankruptcy court filing, arguesz that trimming the ranks of its dealersd will boost the profitabilityh of the dealersthat remain, enabling them to invest in improvementse that will drive up sales. “After a periofd of time, and substantially improverd marketingand investments, overal l sales in the reduced network are anticipated to grow beyonds current sales levels within the existing Chrysler contends.
That’s highly unlikely, according to the . “There’s not an auto executivs that I know ofthat doesn’t acknowledge that when a dealership closes, they lose market share,” said David Hyatt, NADA’es vice president of publicd affairs. Cutting costs was not a major factorin Chrysler’s decision. The auto maker will save some administrativde expenses by having a smaller dealer networkkto oversee, but that’sz about it. Dealers buy their cars befores the vehicles leavethe factory, pay for shipping, frongt the costs of any rebates or warranty and purchase repair equipment.
Dealerzs provide “a robust distribution network at virtually no toauto makers, Hyatt Three local dealerships are slated to lose their franchises with Chryslef — Dayton-based , Eaton-based and , doingt business as in Oxford — along with 786 other dealerx across the country. Tens of thousands of jobs are expectedd to be lost nationwide as a result of the dealership About 300 Chrysler dealers have challengedthe automaker’s requesft for a bankruptcy judge to terminate their dealershilp agreements and pre-empt state laws that would require Chryslere to give dealers more time to wind down their businesses.
Chrysle r has been working to reduce its dealer networjk forseveral years. That process, however, needw to be accelerated because of its proposeed alliancewith Fiat, it contends. Bankruptchy courts routinely terminate contracts if doing so benefitxsthe debtor’s estate and is an exercise of sound businesa judgment, Chrysler states in its filing. Chrysler dealers, contend abruptly closing dealerships doesn’t meet this “There is no evidence that by rejecting dealership agreements New Chryslee will save money to any materiapl degree or enhance its competitive positiomn in theautomobile industry,” states a filing made by the .
“To the contrary, closing dealers narrows distribution andreducexs Chrysler’s sales and income as fewer dealersa buy fewer cars and retail sales are lost to othe brands.” Chrysler’s bankruptcy judge is scheduled to hold a hearinv on this issue June 3. That same day, the is scheduled to hold a hearing on the Chryslef and GMdealership closings. “These companies cannot be allowee to take taxpayer funds fora bailout, and then leave locak dealers and their customers to fend for themselves with no real notice and no real help,” said committee Chairman U.S. Sen. John Rockefeller IV, D-W.Va.
“Wed must ensure that the auto dealerse are treated equitably and have the opportunity to unwind their operations in a manner that will minimize hardships to employees who lose theifr jobs and communities that are adversely said U.S. Sen. Kay Bailey R-Texas. Hutchison was encouraged by a promise from Chryslet PresidentJames Press, who told her the company would help the terminaterd dealers sell their vehicle and parts inventory. If this assistancw falls short, Hutchison is preparedd to push legislation that would give the dealerships an extrs 60 daysbefore closing.
auto dealers and members of Congress are lobbyingf President Barack Obama and his automotive task forc e to reconsider the wisdok of closing so many dealerships so The Obama administration rejected theauto makers’ initial restructuring plans and urgefd them to be more “It should not be the role of government to force these small businesds owners out of business,” said U.S. Rep. Blaines Luetkemeyer, R-Mo., one of several House memberxs who sent a letter to task forcer chiefSteven Rattner, founder of the , a New York private equithy firm. “This decision will not fix the problemz of the auto manufacturing industry, yet it will cost our communitiesd good jobs.
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