Business

Chrysler to drop four area dealerships, 789 overall

Posted May 14, 2009 10:08 a.m. EDT
Updated May 14, 2009 10:16 p.m. EDT

— Chrysler LLC wants to eliminate roughly a quarter of its 3,200 U.S. dealerships by early next month, saying in a bankruptcy court filing Thursday that the network is antiquated and has too many stores competing with each other.

Southern States Dodge in Raleigh, Johnson Chrysler-Dodge-Jeep in Durham, Goldsboro Chrysler-Dodge-Jeep and Williamson Motors in Clinton are among the 789 dealerships the company wants to drop by June 9, according to a motion filed with the U.S. Bankruptcy Court in New York. A total of 14 dealerships are expected to close in the state.

In a press release, Southern States officials in Raleigh said their Dodge dealership is no longer a profitable venture anyway. Officials said no layoffs are planned. Employees will be absorbed into other Southern States locations that sell makes like Mazda, Volkswagen and Nissan. The Nissan dealer will move into the current Dodge showroom.

“It has been something we figured was probably coming down the pike,” said Brian McInerney of Southern States.

McInerney says Dodge sales have been down 50percent in the last year. “Chrysler sales have been slowing down because of everything going on,” he said.

Many of the dealers' sales are too low, the automaker said. Just over 50 percent of dealers account for about 90 percent of the company's U.S. sales, the motion said.

Dealers were told Thursday morning via United Parcel Service letter if they would remain or be eliminated. The move, which the dealers can appeal, is likely to cause devastating affects in cities and towns across the country as thousands of jobs are lost and taxes are not paid.

“It has been difficult for a lot of dealers to survive,” said Steve Morgan, of Westgate Chrysler-Jeep-Dodge in Raleigh.

Morgan, whose dealership was not listed among the closures, said he plans to stick with the car maker.

“Sometimes change is good,” Morgan said. He believes it will allow the company to reorganize and become stronger.

Cutting stores may be good for business, he said.

“Fewer dealers will make the dealers remaining more healthy – increase their sales,” Morgan said.

Morgan said he will continue to honor all Chrysler warranties.

Chrysler spokeswoman Kathy Graham would not comment other than to say the company will notify dealers before speaking publicly. A hearing is scheduled for June 3 in U.S. Bankruptcy Court in New York to determine whether to approve Chrysler's motion.

Don Burk, co-owner of Heritage Chrysler Jeep in Ozark, Mo., said he found out that Chrysler plans to get rid of his dealership when he opened his UPS letter Thursday morning.

"Right now I'm processing the information," he said shortly after reading the letter. "I'm sure I'm going to get with my partner and we'll decide what to do from here."

The dealership, in a city of about 10,000 near Springfield, Mo., is involved in the community, sponsoring sports teams and even buying championship rings for the Ozark High School girls basketball team when it won the state championship several years ago, Burk said.

"If you're a good-sized business, kind of by default you're involved a lot," he said.

Chrysler dealerships aren't the only ones scheduled to get bad news this week. General Motors Corp. says it is notifying 1,100 dealers that it will not renew their franchise agreements when they expire at the end of September of 2010.

In its motion, Chrysler said it has many dealerships that sell one or two of its brands, with Chrysler-Jeep dealerships competing against Dodge dealers as well as other automakers' stores across the country.

"In addition, as suburbs grew and the modern interstate system continued to evolve, longstanding dealerships no longer were in the best or growing locations," the company said in its filing. "Many rural locations also served a diminishing population of potential consumers. Some dealership facilities became outdated. Other locations faced declining traffic count and declining populations."

Chrysler said in its filing that dealers are not competitive enough with foreign brands. Chrysler sold an average of 303 vehicles per dealer in 2008, according to its filing. By contrast, Honda Motor Co. sold about 1,200 vehicles per dealer, while Toyota Motor Corp. sold nearly 1,300 per dealer.

Chrysler said its dealer network "needs to be reduced and reconfigured in a targeted manner to strengthen the network and dealer profitability and to achieve optimal results for the dealers and consumers."

Chrysler has received $4 billion in federal loans and has been operating in bankruptcy protection since April 30. Its sales this year are down 46 percent compared with the first four months of last year and it reported a $16.8 billion net loss for 2008.