Chrysler getting rid of 789 dealers

ChryslerIt is a grim day for many of Chrysler’s dealers as 789 of them were notified that dealership agreements will be cancelled.  This represent approximately 25% of the firm’s 3,188 dealers.  Driven by Italian automaker Fiat, this move aims to shrink their still big network and begin the drive towards efficiency. According to a statement made by Peter Grady, Chrysler’s Director of Dealer Operations, Chrysler this is being done so that the company “can begin implementing efficiencies, marketing strategies, production plans and model changes” with the final goal of improved profitability.

“We are in the process of revitalizing Chrysler’s business to succeed as a viable enterprise under new ownership in the future,” Jim Press, Vice Chairman and President, said. “The unprecedented decline in the industry has had a significant impact on our sales and forced us to reduce production levels to better match the needs of the market.”

Letting go of 789 dealers is part of what Chrysler calls Project Genesis, which would cost $216 billion over eight years.  Having said that, not all dealers would go out of business. Some of them would still be able to do servicing and/or deal used cars and sell other brands.

Mr. Grady noted that Chrysler has many more dealers than competitors like Japan’s Toyota Motor Corp. and Honda Motor Co. As a result, Chrysler dealers sell fewer vehicles on average and have a harder time making money.

In 2008, Chrysler sold 303 vehicles per store. Toyota sold 1,292 and Honda 1,030, Mr. Grady said.

General Motors will follow tomorrow with an announcement to 1,100 of its dealers that their contracts will no longer be renewed.  Total number of dealers to be lost stands at 2,600 (out of 6,246).

Sources: Bloomberg, WSJ

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