Chrysler Makes Drastic Dealership Cuts
Thursday, May 14, 2009SUSIE GHARIB: Hundreds of Chrysler dealerships across the country got the bad news today: shut down your business. The bankrupt auto maker rejected 789 Chrysler dealers or 25 percent of its sales network, telling them to close their doors by June 9. Tomorrow, about a thousand General Motors dealerships will get similar news. As Darren Gersh reports, Chrysler dealers on the list are sad and angry.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: At Ourisman Chantilly Dodge, the news came by overnight express around 9:00 this morning.
BOB HAGER, VP, OURISMAN AUTOMOTIVE OF VIRGINIA: Oh be an accepted letter.
GERSH: That was Bob Hager's first thought as he ripped open the package. But a few minutes later, he was telling his 40 remaining employees Chrysler had rejected their dealership and it now had less than a month to sell 60 remaining dodges.
HAGER: It's like losing a member of the family in some regards, but we'll make it through.
GERSH: From Chrysler's point of view, it's easy to see why the company wants to cut back on its dealer network. Behind me is a Chrysler Jeep dealership. They got their letter this morning saying that they are still in business. And just over the street here, across the street, is the Dodge dealership which got a very different letter this morning. Hager is far from happy about his letter, but he accepts the business logic.
HAGER: With the Fiat product, they don't want to have to re-badge the car under Dodge or Chrysler Jeep. They want to have one consolidated product line.
GERSH: After June 9, former dealers won't be eligible for Chrysler incentives or rebates. And surviving dealers like Tammy Darvish have been told they may be asked to buy inventory from dealers who are shutting down. We caught up with her outside an auto dealers meeting in Washington. Darvish is losing two of her eight Chrysler dealerships.
TAMMY DARVISH, VP,DARCARS AUTOMOTIVE GROUP: It's about growing up with a dream to take over a family business and a $15 Federal Express package makes or breaks that.
GERSH: Hager's Chrysler dealership in another location will survive. And he has a back up plan for the dealership he is losing. Hager saw this day coming.
HAGER: We brought Kia into our line up in the middle of April. We've done very well with Kia. The Kia part stays. We are an official Kia dealer.
GERSH: Some of the dealers we spoke with think Chrysler is making a huge mistake by slashing its sales force. Jack Fitzgerald has five dealerships on Chrysler's rejected list.
JACK FITZGERALD, OWNER, FITZGERALD AUTO MALL: : The only edge that Detroit had was the large number of dealers. If you go out to fight a war, the bigger the army, the better off you are.
GERSH: A quarter of Chrysler's army is now being told to surrender. But first, there are 44,000 cars those soon to be former dealers must sell and fast. Darren Gersh, NIGHTLY BUSINESS REPORT, Chantilly, Virginia.
JEFF YASTINE: While Chrysler and GM are drastically cutting dealer networks, Ford Motor is only planning to consolidate some dealers in big cities. Those comments came at Ford's annual meeting today. The auto maker expects to at least break even by 2011 and possibly turn a profit without a government bailout.
