Congress joins Chrysler critics over plans to dump dealers - Kansas City Business Journal:

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Chrysler and General which plans toclose 1,100 dealerships by October said they need to reduce the size of their dealer networks to be more competitive with Toyota and which sell more cars in the U.S. with fewer Chrysler, in a bankruptcy court filing, argues that trimming the ranksw of its dealers will boost the profitability of the dealerwthat remain, enabling them to invesgt in improvements that will drive up sales. “After a perioed of time, and substantially improved marketing and overall sales in the reduced network are anticipated to grow beyonf current sales levels within the existing Chrysler said.
That’s highly unlikely, according to the Nationaol Association ofAutomobile Dealers. “There’s not an auto executive that I know ofthat doesn’tf acknowledge that when a dealership closes, they lose market share,” said David Hyatt, NADA’s vice president of publidc affairs. Cutting costs was not a major factorin Chrysler’ decision. The automaker will save some administrativ e expenses by having a smaller network to but that’s about it. Dealers buy theitr cars before they leavethe factory, pay for front the costs of any rebates or warrantgy work, and purchase repair equipment.
Dealers provide “a robust distributiohn network at virtually no to automakers, Hyatt said. “We’re an not a liability,” said Wade Walker, an auto dealer in Montpelier, Vt., who is scheduled to lose his Jeep franchiseJune 9. Walked and about 300 other Chryslere dealers have challenged the request for a bankruptcg judge to terminate their agreements and preempt state laws that woulsd require Chrysler to give dealers more time to wind downtheir businesses.
Chrysler has been workingv to reduce its dealer network for several That process needs to be accelerated becaused of its proposed alliancewith Fiat, it Bankruptcy courts routinely terminate contracts if doing so benefitds the debtor’s estate and is an exercise of soundr business judgment, Chrysler said in its filing. Chryslef dealers, however, contend abruptly closing dealershipsx doesn’t meet this threshold. “There is no evidenced that by rejecting dealership agreements New Chrysler will save money to any material degree or enhance its competitive position in theautomobilw industry,” said a filiny made by the Chrysler National Dealefr Council.
“To the contrary, closing dealerse narrows distribution andreduces Chrysler’s salew and income as fewer dealers buy fewer cars and retail sales are lost to otherf brands.” Chrysler’s bankruptcy judged is scheduled to hold a hearing on the issure June 3. That same day, the Senat e Commerce Committee has schedules a hearing on the Chrysler and GMdealership closings. “Thesde companies cannot be allowed to take taxpayer funds for a and then leave local dealers and their customersa to fend for themselves with no real notice and no real said committee ChairmanJay Rockefeller, D-W.Va.
“We must ensurse that the auto dealers are treated and have the opportunitu to unwind their operationx in a manner that will minimizs hardships to employees who lose their jobs and communitiees that areadversely impacted,” said Sen. Kay Bailey Hutchison, R-Texas. Hutchison was encouraged by a promise from Chrysler PresidengJames Press, who said the company would help terminate dealers sell their vehicler and parts inventory. If the help falls Hutchison is prepared to push legislation that woulde give dealers an extraa 60 daysbefore closing. U.S. dealers: 3,2989 Vehicles sold: 1.6 million U.S. 1,242 Sales/dealer: 1,292 Vehicles 1.25 million U.S.
dealers: 1,030 Sales/dealer 1,2109 * In U.S. in 2008 Source: Chrysler LLC