Chrysler to close 789 of 3,200 dealerships

FAST FACTS

Chrysler moves to eliminate 789 of 3,200 dealers.

Dealers were told Thursday morning through UPS letters if they would remain or be eliminated.

Chrysler said in its filing that dealers are not competitive enough with foreign brands.

Chrysler has received $4 billion in federal loans and has been operating in bankruptcy protection since April 30.

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List of dealerships slated for closure (PDF)

Chrysler website

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NEW YORK (AP) - Chrysler LLC wants to eliminate roughly a quarter of its 3,200 U.S. dealerships by early next month, saying in a bankruptcy court filing Thursday that the network is antiquated and has too many stores competing with each other.

The company, in a motion filed with the U.S. Bankruptcy Court in New York, said it wants to eliminate 789 dealerships by June 9. Many of the dealers’ sales are too low, the automaker said. Just over 50 percent of dealers account for about 90 percent of the company’s U.S. sales, the motion said.

Dealers were told Thursday morning through United Parcel Service letters if they would remain or be eliminated. The move, which the dealers can appeal, is likely to cause devastating effects in cities and towns across the U.S. as thousands of jobs are lost and taxes are not paid.

Chrysler spokeswoman Kathy Graham would not comment other than to say the company will notify dealers before speaking publicly. A hearing is scheduled for June 3 in U.S. Bankruptcy Court in New York to determine whether to approve Chrysler’s motion.

Judges often rely on companies in bankruptcy to help determine what is in their best business interest, such as the closure of dealerships or cancellation of contracts.

Chrysler dealerships aren’t the only ones scheduled to get bad news this week. General Motors Corp. says it is notifying 1,100 dealers that it will not renew their franchise agreements when they expire at the end of September of 2010.

In its motion, Chrysler said it has many dealerships that sell one or two of its brands, with Chrysler-Jeep dealerships competing against Dodge dealers as well as other automakers’ stores across the country.

Chrysler said in its filing that dealers are not competitive enough with foreign brands. Chrysler sold an average of 303 vehicles per dealer in 2008, according to its filing. By contrast, Honda Motor Co. sold about 1,200 vehicles per dealer, while Toyota Motor Corp. sold nearly 1,300 per dealer.

Chrysler said its dealer network “needs to be reduced and reconfigured in a targeted manner to strengthen the network and dealer profitability and to achieve optimal results for the dealers and consumers.“

Chrysler has received $4 billion in federal loans and has been operating in bankruptcy protection since April 30. Its sales this year are down 46 percent compared with the first four months of last year and it reported a $16.8 billion net loss for 2008.

Copyright 2009 The Associated Press.