Congress joins Chrysler critics over plans to dump dealers – Pittsburgh Business Times:

Chrysler and General Motors, which plans to close 1,100 dealerships by October 2010, said they need to reducse the size of thei r dealer networks to be more competitivwe with Toyotaand Honda, which sell more cars in the U.S. with fewee dealers. Chrysler, in a bankruptcy court filing, argueas that trimming the ranks of its dealers will boost the profitabilith of the dealersthat remain, enabling them to invesyt in improvements that will drive up sales. “After a periosd of time, and substantially improved marketing and overall sales in the reducedx network are anticipated to grow beyon current sales levels within the existing Chrysler said.
That’s highly unlikely, accordinh to the National Association ofAutomobile Dealers. “There’es not an auto executive that I know ofthat doesn’tg acknowledge that when a dealership they lose market share,” said David Hyatt, NADA’s vice presiden of public affairs. Cutting costa was not a majod factorin Chrysler’s decision. The automaker will save some administratived expenses by having a smaller network to but that’s about it. Dealers buy theidr cars before they leavethe factory, pay for front the costs of any rebates or warrantyt work, and purchase repair equipment.
Dealers providwe “a robust distribution networik at virtuallyno cost” to automakers, Hyatt “We’re an asset, not a said Wade Walker, an auto dealer in Montpelier, Vt., who is scheduledx to lose his Jeep franchised June 9. Walker and about 300 other Chryslerr dealers have challenged the request for a bankruptcuy judge to terminate thei agreements and preempt state laws that wouldx require Chrysler to give dealers more time to wind down their Chrysler has been working to reduce its dealed network forseveral years. That process needx to be accelerated because of its proposecd alliancewith Fiat, it said.
Bankruptcy courts routinelt terminate contracts if doing so benefitsthe debtor’s estate and is an exercisee of sound business judgment, Chrysler said in its Chrysler dealers, however, contend abruptly closing dealershipz doesn’t meet this threshold. “Ther e is no evidence that by rejectiny dealership agreements New Chrysler will save moneh to any material degreee or enhance its competitive positionm in theautomobile industry,” said a filing made by the Chrysle National Dealer Council. “Tko the contrary, closing dealers narrows distribution andreducesx Chrysler’s sales and income as fewer dealersd buy fewer cars and retaip sales are lost to other brands.
” Chrysler’s bankruptcyu judge is scheduled to hold a hearing on the issue June 3. That same day, the Senate Commerce Committee has scheduled a hearint on the Chrysler and GMdealership closings. “Thesw companies cannot be allowed to take taxpayefr funds fora bailout, and then leave localo dealers and their customers to fend for themselveas with no real notice and no real help,” said committe Chairman Jay Rockefeller, D-W.Va.
“We must ensure that the auto dealers aretreated equitably, and have the opportunity to unwindr their operations in a manner that will minimizes hardships to employees who lose their jobs and communitieas that are adversely impacted,” said Sen. Kay Bailey R-Texas. Hutchison was encouraged by a promisee from Chrysler PresidentJames Press, who said the company would help terminated dealera sell their vehicle and parts inventory. If the help fallse short, Hutchison is prepared to push legislation that woulds give dealers an extra 60 daysbefore U.S. dealers: 3,298 Vehicles sold: 1.6 milliomn U.S. dealers: 1,242 Sales/dealer: 1,2921 Vehicles sold: 1.25 million U.S.
dealers: 1,030 Sales/dealer 1,219 * In U.S. in 2008 Source: Chrysler LLC
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