Chrysler seeks to drop 789 dealers, one in four

Friday, May 15, 2009 at 1:51 AM Posted by Beijing News


Chrysler asked a bankruptcy court Thursday to shut down 789 dealers, nearly one-fourth of its sales outlets, saying this will cut costs and boost the odds for the success of its alliance with Italy's Fiat.

The troubled auto giant, which is aiming for a quick court restructuring to start fresh under a partnership with Fiat, said the large dealer network compared with its rivals "substantially increases expenses and inefficiencies in the distribution system."

The large number of dealers creates costs for "training, new vehicle allocation personnel, processes, and procedures, oversight" as well as other expenses, Chrysler said in a court filing.

The filing said that Chrysler sold some one million vehicles last year through 3,298 dealers, for an average of 303 per dealer. By contrast, Toyota sold 1.6 million new vehicles in the United States through 1,242 dealers and Honda sold 1.2 million through 1,030 dealers.

"This effort to strengthen the domestic dealer network is a critical component of the proposed Fiat transaction both to improve the viability of the domestic dealer network and position New Chrysler for viability and long-term success," the filing said.

Chrysler now has 3,181 dealers in the United States, down from a high of 6,500 in the 1960s and 4,320 in 2001, according to the court documents.

Court approval of the plan would leave Chrysler with 2,392 domestic auto dealers.

Chrysler, which filed for bankruptcy protection on April 30, said it hopes to wrap up the court process within 30 to 60 days by selling the automaker's main assets to a new entity including Fiat.

The new firm would be majority owned by the United Auto Workers UAW union, with small stakes by the US and Canadian governments, which would contribute some 10.5 billion dollars to the venture.

Fiat would initially take a 20 percent stake in the firm that would rise to 35 percent and could reach 51 percent as early as 2013 if Chrysler is able to repay its government loans.

Chrysler cleared a major hurdle to its restructuring plan last week after a group of creditors dropped their objections to a plan to sharply reduce the value of their debt holdings.

The plan would reduce some 6.9 billion dollars in secured loans to around 2.0 billion dollars.

Major banks had agreed to the deal ahead of the bankruptcy filing, but a group holding some one billion dollars in debt had objected. These holdouts dwindled down and eventually dropped their claims.





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