Chrysler Dealer Franchise Agreement Terminations, 2009

Chrysler terminated 789 dealerships in June 2009, notifying them in writing. Due to its bankruptcy, Chrysler did not have to buy back vehicles, parts, or tools from the dealers losing their franchises but it did try to find buyers for dealer assets including 44,000 unsold cars and trucks. Customers bought 15,000 of these and dealers committed to take a further 26,000.

According to Chrysler, 83% of the dealers losing their franchise sold more used cars than new cars, and 44% held other companies' franchises, so they could be converted to competing brands.

There have been some interesting problems; Automotive News brought up the island of Maui, which lost its only Chrysler dealer. Similar but less extreme cases popped up across the country, with isolated areas losing their only dealers.

The political scandal

Before the government got involved with Chrysler, the company had already discussed the need to reduce the number of dealers and was pressuring dealers to sell all three brands. This would have resulted in a high degree of overlap in some areas, particularly those where Chrysler, Dodge, and Jeep dealers with different owners were in close proximity.

President Obama was publicly charged with forcing the closure of Chrysler dealers who contributed to the Republican Party; the source of this story, which has been featured on hundreds of sites (without attribution, was traced down to a Republican Congressman whose own franchise was being pulled. His evidence was a quote from a politically involved lawyer for the dealers who were losing their franchises.

The story sounded convincing at first, but the theories of vengenace don’t hold water. The chairman of the new Chrysler Group was a member of GeorgeW. Bush's election organization and a consistent contributor to Republican candidaets, for example.

Two dealers that have been pointed out as being singled out for revenge are Florida representative Vern Buchanon and James Auffenberg. Buchanon has been publicly linked to fraud, and Auffenberg was indicted for tax fraud, giving them rather low credibility.

Originally, the story claimed that all the 789 dealers losing their franchises were owned by Republican Party donors, the story quickly changed to all-but-one. Some research showed that eight dealership owners had donated to Democratic candidates. Indeed, on a percentage basis, there were more Democrats (as a percentage) in the closing dealerships than in the ones staying open.

Pollster Nate Silver found that 92% of dealerships remaining open also contributed to the Republicans. Past Automotive News polls have shown that an overwhelming majority of car dealer owners are Republican donors.

Steve Landry of Chrysler stated that the dealers were evaluated using a “thorough, rigorous process that used a data-driven metric.” Factors included new car sales (with a minimum that eliminated some dealers known for their good service ); local share; customer satisfaction with sales and service; the facility itself (capacity and meeting new standards); location; and being paired with a competitor.

There likely were political considerations, but it would be company, not national, politics. No reputable group, including NADA, ever accused Chrysler of using Democrat-vs-Republican politics in their choice of which dealers to close.

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