Chrysler Plans to Shut One Quarter of Its U.S. Dealers

About a quarter of Chrysler’s dealers are receiving letters Thursday telling them that the company plans to eliminate them by June 9.

Chrysler, which filed for bankruptcy protection two weeks ago, sent letters to 789 of its 3,200 dealers revoking their franchises with the carmaker. It also filed a list of the dealers it is cutting in bankruptcy court Thursday.

Other dealers received letters welcoming them to the new Chrysler.

“It just says whether you’re in or out,” said Anthony Viviano, who owns two Dodge dealerships in Detroit’s suburbs and is president of the Detroit Dodge dealers association. “Some of my fellow dealers have already called and said they’re out. They got the poison letter.”

One of Mr. Viviano’s two dealerships was on the list.

But he said some dealerships could be saved by rulings from Chrysler’s bankruptcy judge or if other dealers decide to sell their franchises.

Chrysler said it needed to eliminate dealerships so that it can be viable in the future and the stores that remain can be more profitable.

On Friday, 1,000 to 1,200 General Motors dealers are expected to receive notices that they are being cut. Their franchises will expire in October 2010, a G.M. spokeswoman, Susan Garontakos, said.

Officials from the National Automobile Dealers Association are meeting Thursday with members of the Obama administration’s auto industry task force. The association is urging the task force to let G.M. and Chrysler keep more dealerships and argues that the cuts will cause the two companies to lose a significant number of sales in the months ahead. About 150 dealers flew to Washington on Wednesday to plead their case with members of Congress.

“We’re not objecting to consolidation. We understand the realities of the marketplace,” John McEleney, the N.A.D.A. president and owner of two G.M. dealerships in Iowa, said. “The situation’s going to get taken care of by natural market forces. To radically accelerate the process doesn’t seem to make sense in this environment.”

___________

Full article: http://www.nytimes.com/2009/05/15/business/15dealers.html?_r=1&hp