The 789 terminated dealers accounted for only 14% of Chrysler's total sales volume.

Chrysler LLC this morning filed a motion with the U.S. Bankruptcy Court in New York cancelling its U.S. dealer agreements with 789 dealers in 49 states. The only state spared was Alaska. If the court approves, and there is no reason to think it won’t, 2,392 Chrysler, Jeep or Dodge dealers will continue with the new company as it emerges from bankruptcy in a global alliance with Fiat.  

For owners and prospective customers, this latest development clarifies where to buy or where to get Chrysler products serviced. The 789 terminated dealers accounted for only 14% of Chrysler’s total sales volume.

“This is a difficult day for us, but we’re going forward with the approval of the bankruptcy court,” said vice chairman Jim Press.  “There are no winners and no losers. This is the way it is,” said Press, adding Chrysler will now have a “once in lifetime” opportunity to build a powerful dealer network that maximizes dealer franchise value, sales and convenience for customers. 

Clearly the losers are the 789 dealers who will no longer be authorized to handle Chrysler products. However, many of them, 44%, were dualed with other makes, or sold more used cars than new cars, creating opportunities for them to remain in business.  

Press also emphasized the decisions were strictly made by Chrysler. Fiat and the U.S. Treasury Department, the automaker’s new owners, were notified that the cuts were pending, but the final decisions on which dealers to terminate were made by Chrysler’s own personnel.

Press avoided questions about the legal implications of the mass termination.  However, he did note that the franchise agreements were being terminated under the auspices of the bankruptcy court. “There are no appeals,” he said.

Chrysler plans to maintain “business as usual” with all of its dealers through the transition. The company intends to honor warranty and incentive payments during the period that the rejected dealers remain active.

Chrysler is “committed to working with these dealers to ensure a positive relationship with customers. To ease the burden on dealers whose agreements have not been assumed, Chrysler will work to assist in the redistribution of new vehicles and parts to the remaining dealer network,” Chrysler said.

Two days ago the Bankruptcy Court approved a motion about Chrysler’s agreement with GMAC Financial Services to provide the automotive financing products and services to the company’s dealers and customers moving forward.

GMAC Financial Services will be the preferred lender in North America for Chrysler, Jeep and Dodge dealer and consumer financing, including funds of the wholesale of new and used vehicles as well as retail contracts. GMAC Financial Services will be able to offer “the best long-term finance options for Chrysler dealerships and customers,” said Chrysler, and GMAC is established as a bank holding company with access to a variety of funding sources, including the U.S. Treasury.

While difficult, the actions to restructure its dealer network are a necessary part of Chrysler’s viability plan and are central to the proposed sale transaction. These actions will help ensure that both remaining dealers and the new company will be stronger and more profitable going forward.

“A stronger dealer network supported by GMAC’s long-term finance options provides an advantage to consumers, and that is what will ultimately drive the creation of a significantly stronger global competitor,” said Press.

Joe Szczesny also reported on this TDB story.