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Jim Press attacks dealer myths

by David Zatz on

Jim Press attacked several “dealer myths” in front of Congress, defending Chrysler’s actions:

Despite completing a painful restructuring, the New Chrysler Group will retain 86% of Chrysler dealers by volume, and 75% by location.I can empathize with the dealers who were not brought forward into the new company, and can understand their disappointment. This has been the most difficult business action I have personally ever had to take.

He answered four questions which he claimed he heard most in Washington:

  1. Was discontinuing these dealers really necessary to Chrysler’s survival? Press noted that the company’s sales had fallen dramatically, that the dealer channel as a whole was losing money, and that without profits, dealers could not invest in training, people, or facilities, hurting customer satisfaction. He noted that they needed a realigned, new dealer network on the first day of the new Chrysler Group. Judge Gonzalez endorsed the move, saying it was “an exercise of sound business judgement” and “appropriate and necessary.”
  2. Do dealers really cost anything? The answer is, yes, primarily due to extra marketing,advertising, and administrative costs (together, $183 million per year according to Press), as well as the need to have “sister vehicles” (Dodge and Chrysler or Jeep and Dodge versions) which he claimed added $1.4 billion in product engineering costs over four years.
  3. My dealer said he was profitable, why not keep him? Press said that in general the dropped dealers were the least profitable in the network. Those that were profitable were often losing money on their new car business and making it up from used cars.
    1. Many were in poor locations
    2. 555 were standalones, not viable in the future without all three brands
    3. Half sold fewer than 101 vehicles per year
    4. 44% sell competing brands in teh same showroom; of those, Chrysler is only 12% of their business (as an example, on dealer is profitable, but sold only 24 new Dodges, with 210 used vehicles; he also sold Buick, Pontiac, Subaru, and Isuzu, and Dodge was only 3% of his new car total).
  4. Are you leaving your dealers “high and dry?” Press answered that every dealer was contacted; financing was arranged to redistribute inventory, including parts and tools; buyers for every unsold vehicle were found; dealers have commitments for 80% of their parts inventory already.
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