Chrysler will terminate 789 dealerships by June 9. The affected dealers were notified by UPS letters.
As a company in Chapter 11 proceedings, Chrysler does not have to buy back vehicles, parts, or tools from the dealers losing their franchises. It will, however, try to find buyers for dealer assets among those who remain.
According to Chrysler, 83% of the dealers losing their franchise sell more used cars than new cars. In addition, 44% hold other companies’ franchises (e.g. Kia), so the dealerships may be converted to competing brands.
80% of the remaining dealerships will sell all three brands; and it may be easier for the remaining 20% to pick up the missing brands by purchasing the necessary inventory, signage, and (in some cases) tools, and by hiring expert mechanics, from dealerships losing their franchise. This will allow Chrysler to drop overlapping models (e.g. Jeep Compass vs Dodge Caliber).
According to a company memo, the dealers will be allowed 23 days for a court review of their individual cases.
Update: the politics of dealer closings
President Obama has been charged with forcing the closure of Chrysler dealers who contributed to the Republican Party, even though the chairman of the new Chrysler Group was a member of G.W. Bush’s election organization and has consistently contributed to Republicans running for Congress and the White House. The source of this story, which has been featured on dozens of sites now and appears to have been picked up by Rush Limbaugh, is a Republican dealership-owning Congressman whose franchise is being pulled, whose evidence is a quote from a Republican lawyer for the dealers who are losing their franchises.
While 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 on a neocon blog which repeatedly made reference to “Chicago politics” and attempted to paint Obama as a ruthless communist showed, however, that eight of 39 dealership owners who had made donations that appeared in public databases had donated to Democratic candidates, which means that there appear to be more Democrats (as a percentage) in the closing dealerships than in the ones staying open.
Nate Silver studied the numbers and 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.
Two dealers that have been pointed out as being singled out for revenge are Florida representative Vern Buchanon and James Auffenberg. However, Buchanon has been linked to fraud, and Auffenberg was indicted for tax fraud.
No analysis has examined the politics of the dealers who remain open vs those who are closing. Chrysler did post the rationale, along with supporting facts, such as the fact that the closed dealers, as a group, account for a very small proportion of the company’s new car sales.
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.
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.
The “news sources” reporting a political bias invariably refer to “Chicago politics,” and tend to claim Obama to be a communist, call the move “income redistribution,” and frequently use derogatory terms such as “Lord Obama” or “Comrade Obama,” indicating that remaining bias free is not a priority.
It is possible that there was a political motivation behind the list, which was according to all accounts generated within Chrysler, but that has yet to be demonstrated. No reputable group, including NADA, has yet made that accusation.
The lists are:
Chrysler dealerships losing their franchise (PDF)