Readers are probably well aware that Chrysler and GM have started the process of closing dealerships. Chrysler is shedding 789 of its 3200 dealers, and GM is excising 2600 of its 6246, with 1100 notified last week. UBS estimates that the total job losses could reach 160,000, although some dealers may be able to operate at a lower level of activity as service operations and/or used car dealers, and may be able sign up with another brand.
GM is trying to make the best of a bad situation for the ditched dealers:
GM Chief Executive Fritz Henderson said Monday that GM would work with the dealerships being cut to ensure an orderly wind down.
“As I look at it, it is work that will take place through ’09, and then we would wind down and handle the distribution of cars and make sure the customers are taken care of … make sure that dealers are reimbursed for warranties and that sort of thing,” Henderson said. “This is not a several week process.”
While many of the dealerships identified for closure could exit the business this year, [GM Spokeswoman] Garontakos said they can also stay active through September 2010.
By contrast, Chrysler is shutting the dealers abruptly, leaving them stranded with inventory bur no right to perform warranty work on the unsold cars. And while most dealers presumably believe they should have survived the cut, the story forwarded by reader Milton L also raises doubts about the quality of thinking behind the selection process.
Chrysler was heavily over-represented in some areas. Milton reports that he determined that there were 15 dealers in a 25 mile radius of his home. The message from his friend Rob E, a soon-to-be former Chrysler dealer (which we have been authorized to reproduce), suggests an unnecessarily destructive and ill-thought out process:
Thanks for your concern. Things are really tough right now. Chrysler cancelled both our dealerships. Our 2 dealerships were in first and second place in the northeast zone for customer retention, out of a total 350 dealers. We are the largest parts dealer in the tri-state area, and exceed our sales and service targets as well. It is a huge financial blow to us. All my savings is tied up in the business, as well as my mother’s. (87 years old) They are not allowing us to even return vehicles or parts. My brother and I are running around trying to find legal representation in bankruptcy court, as well as join a class action suit.
The value of the properties is far below what we owe on the mortgage. At Chrysler’s request, we had improved both dealerships by putting up new buildings. At their request, we also leased a separate warehouse for 3 years for parts storage.
To come out of bankruptcy successfully, they will need a strong distribution network. Cancelling dealers will not help them. For those dealers that were very much underperforming, they should cancel them in a humane way by
giving them a year to sell their property, sell down their inventory and allow the employees time to find another job. Instead, they gave us until June 9th!
I will be sending all my customers a letter with some talking points, telling them that we intend to stay in business to service their vehicles, and sell used vehicles. Without being able to perform warranty work, this won’t be easy. I will send you a copy of the letter when it is done.