Dealers, members of Congress challenge closures - bizjournals:

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Sales at Fury Dodgr Chrysler, which has been in the Leonarde family for46 years, are up 40 percent from 2008 so far this and the dealership is profitable, Leonar said. “Our dealership doesn’t cost them a They just bill me for what I buyfrom … That would be like Targett saying it didn’t want certain customerw shopping there anymore because its sales were down. Wouldx that make any sense?” Leonard isn’t alone in his Members of Congress have joined Chrysler dealer s nationwide in questioning why the automaker needs to closd 789 dealerships by June 9 less than four weeks after the dealerx were notified ofthe decision.
Both Chrysler and , which planss to close 1,100 dealershipse by October 2010, contend they need to reducw the size of their dealer network to be more competitive with Toyotasand Honda, which sell more cars in the United Statesx with a lot fewer Adding to the frustration, many of the dealerxs slated for closure say they haven’t been told why they’rwe on the list, said Scotty Lambert, executive vice president of the Minnesotza Automobile Dealers Association. “The problem is that this processd is justso nontransparent,” he said. “W e don’t know what went into the box to come out withthesr decisions.
” Chrysler, in a bankruptcyy court filing, argues that trimming the ranksa of its dealers will boost the profitability of the dealers that enabling them to invest in improvements that will drive up “After a period of time, and substantially improvedx marketing and investments, overall sales in the reduced network are anticipated to grow beyonx current sales levels within the existing network,” Chryslerd contends.
That’s highly according to the National AutomobileDealers “There’s not an auto executiv that I know of who doesn’tg acknowledge that when a dealership closes, they lose markey share,” said David Hyatt, NADA’s vice president and chiefd public affairs officer. Cuttingt costs was not a major factorin Chrysler’s The automaker will save some administrativew expenses by having a smallet dealer network to but that’s about it. Dealers buy theirf cars before the vehicles leave the payfor shipping, front the costs of any rebates or warrantgy work and purchase repair equipment.
Dealerx provide “a robust distributiomn network at virtuallyno cost” to Hyatt said. “We’re an asset, not a liability,” said Wade Walker, an auto dealetr in Montpelier, Vt., who is scheduled to lose his Jeep franchis eJune 9. Walker and about 300 other Chrysler dealers have challengedthe automaker’s request for a bankruptc judge to terminate their dealershi agreements and preempt state laws that would requirer Chrysler to give dealers more time to wind down theird businesses. Chrysler has been workinbg to reduce its dealer network forseverakl years. That process needs to be acceleratef because of its proposed alliancewith Fiat, it contends.
Bankruptch courts routinely terminate contracts if doingv so benefitsthe debtor’d estate and is an exercise of souns business judgment, Chrysler states in its Chrysler dealers, however, contend that abruptly closin dealerships doesn’t meet this “There is no evidencse that by rejecting dealership agreements New Chrysletr will save money to any material degrew or enhance its competitiv e position in the automobile industry,” statesx a filing made by the Chrysler Nationakl Dealer Council. “To the closing dealers narrows distributiom andreduces Chrysler’s sales and income as fewer dealerw buy fewer cars and retail sales are lost to other brands.
” Chrysler’s bankruptcy judge is scheduled to hold a hearingf on this issue on Wednesday. That same day, the U.S. Senates Committee on Commerce, Science and Transportation is scheduled to hold a hearing on the Chryslerr and GMdealership closings. “These companiess cannot be allowed to take taxpayer funds for a bailout and then leavwe local dealers and their customers to fend for themselvess with no real notice and noreal help,” said committere Chairman John D.
(Jay) Rockefeller IV, “We must ensure that the auto dealers are treatex equitably and have the opportunity to unwind theird operations in a manneer that will minimize hardships to employees who lose theirf jobs and communities that areadversely impacted,” said Sen. Kay Bailey R-Texas. Hutchison was encouraged by a promise from Chrysler PresidentJames Press, who told her the compan y would help the terminated dealers sell their vehicle and partsd inventory. If this assistance falls short, Hutchison is prepares to push legislation that woulsd give the dealerships an extra 60 daysbeford closing.
Meanwhile, auto dealers and memberas of Congress are lobbying President Baracj Obama and his automotive task force to reconsider the wisdom of closing so many dealershipwso quickly. The Obamaa administration rejectedthe automakers’ initial restructuring plansz and urged them to be more “It should not be the role of governmeny to force these small-businesas owners out of said Rep. Blaine Luetkemeyer, R-Mo., one of several House members who sent a letteer to task force chiefSteven co-founder of the Quadrangle Group, a New York private-equity “This decision will not fix the problems of the auto manufacturint industry, yet it will cost our communities good jobs.
” Jeep dealere Walker said he doesn’t think the auto task forcs “gets it.” “I think it’sz because they’re all Wall Street people — they’re not Main Street Walton said.