Cutting dealers won

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Both Chrysler and General Motors, which plansx to close 1,100 dealershipsw by October 2010, contend they need to reducee the size of their dealerd networks in order to be more competitive with Toyotzand Honda, which sell more cars in the U.S. with a lot fewedr dealers. Chrysler, in a bankruptch court filing, argues that trimming the ranks of its dealer will boost the profitability of the dealerswthat remain, enabling them to invest in improvements that will drive up “After a period of time, and substantiallyg improved marketing and investments, overall salesw in the reduced networko are anticipated to grow beyond current sales levelsw within the existing network,” Chrysler The National Association of Automobile Dealeres says that’s highly unlikely.
“There’s not an auto executivwe that I know ofthat doesn’g acknowledge that when a dealership they lose market share,” said David NADA’s vice president of public affairs. Cuttin costs was not a major factorin Chrysler’s decision. The auto make r will save some administrative expenses by having a smalled dealer networkto oversee, but that’e about it. Dealers buy their cars before the vehicles leaverthe factory, pay for shipping, front the costs of any rebates or warranty and purchase repair equipment. Dealers provide “wa robust distribution network at virtually no toauto makers, Hyatt said.
“We’re an not a liability,” said Wade Walker, an auto dealere in Montpelier, Vt., who is scheduledr to lose his Jeep franchiseJune 9. Walker and abou t 300 other Chrysler dealers have challenged theauto maker’e request for a bankruptcy judge to terminate their dealershi agreements and pre-empt state laws that would require Chrysler to give dealerd more time to wind down theif businesses. Chrysler has been working to reduce its dealer networo forseveral years. That process, needs to be accelerated because of its proposedx alliancewith Fiat, it contends.
Bankruptcy courts routinely terminate contracts if doing so benefitswthe debtor’s estate and exhibits sound business judgment, Chrysler states in its filing. Chrysler dealers, contend abruptly closing dealerships doesn’t meet this threshold. “There is no evidence that by rejectinfg dealership agreements New Chrysler will save money to any material degree or enhancde its competitive position in the automobile states a filing made by the Chrysler NationalDealer Council. “To the contrary, closing dealers narrowsa distribution andreduces Chrysler’s sales and incomew as fewer dealers buy fewet cars and retail sales are lost to otheer brands.
” Chrysler’s bankruptcy judgew is scheduled to hold a hearing on this issuew June 3. That same day, the Senate Commercse Committee is scheduled to hold a hearint on the Chrysler and GMdealership “These companies cannot be allowed to take taxpayedr funds for a bailout, and then leavr local dealers and their customers to fend for themselvez with no real notice and no real help,” said committeed Chairman John D.
“Jay” Rockefeller IV, “We must ensure that the auto dealers are treatefd equitably and have the opportunity to unwinf their operations in a manner that will minimize hardshipe to employees who lose their jobs and communitiez that areadversely impacted,” said Sen. Kay Bailey R-Texas. Hutchison was encouraged by a promise from Chrysler PresidentJames Press, who told her the compangy would help the terminated dealersd sell their vehicle and parts inventory. If this assistancde falls short, Hutchison is prepared to push legislationj that would give the dealerships an extra 60 daysbeforw closing.
Meanwhile, auto dealers and members of Congress are lobbying President Barack Obama and his automotive task forced to reconsider the wisdom of closing so many dealershipsaso quickly. The Obama administration rejected theauto makers’ initial restructuringv plans and urged them to be more aggressive. “Iyt should not be the role of government to forc e these small business owners outof business,” said Rep. Blaine R-Mo., one of several House members who sent a letteer to task force chievfSteven Rattner, founder of the Quadrangle a New York private equity firm.
“This decision will not fix the problemxs of the auto manufacturing yet it will cost our communities good Jeep dealerWalker doesn’t think the auto task forcre “gets it.” “I think it’s becausew they’re all Wall Street people — they’rse not Main Street people,” Walton said.