The Detroit Free Press is reporting on the closed Chrysler dealership details and it appears these dealerships are stuck with the existing inventory and all of the parts on hand. Talk about guaranteeing these dealerships go down in flames, this has to be it:
Now that it has notified 789 dealerships they would be terminated, Chrysler must sell the 44,000 vehicles sitting on their lots in the next few weeks without driving prices to fire-sale levels for remaining dealers.
"It's going to be a challenge even with the factories closed to redistribute that number of vehicles and sell them in a short period of time," said Mike Jackson, CEO of AutoNation, the nation's largest auto retailer. Even a giant like AutoNation will lose seven Chrysler, Jeep and Dodge dealerships that employ 400 people.
Despite that, Jackson called the closings painful, but necessary.
"If you're over-dealered, you can't compete successfully for capital and talent," Jackson said. "Over the last 20 years, there has been a migration of capital and talent from the domestic franchises to the Asians, and that has to be reversed."
Chrysler said it would move the inventory from the rejected dealers to those that stay open and try to sell most of it over the next four to six weeks. But it's unclear who gets the money from the sale of those vehicles.
"Chrysler LLC is unable to repurchase your new vehicle inventory," the company said in a letter to the closing dealers. "Chrysler LLC is unable to repurchase your Mopar parts inventory."
Chrysler's Steven Landry, executive vice president of North American sales and marketing, said there would be no compensation to those dealers who owe various amounts to Chrysler Financial for that inventory.
It's one thing to close them, plus lose all of those jobs, but to stick it to the business owner on parts and inventory too?
Now GM has announced closing 1100 dealerships:
General Motors Corp., facing a probable bankruptcy filing by June 1, is telling 1,100 U.S. dealers it plans to terminate them as the automaker starts shrinking its retail network.
None of the dealers are being shut now, pending discussions “over the next few weeks” GM said in a statement. The dealers hold about 120,000 unsold autos valued at about $2.5 billion, said a person familiar with GM’s plans who asked not to be identified because those details aren’t public.
The closings are GM’s first step toward paring U.S. dealers to 3,600 from 5,969 by the end of next year. With fewer outlets, the survivors each may be able to sell more cars at higher prices, boosting profit.
Update: GM will take back inventory of the closed dealerships. GM is not going to renew contracts when they expire. That's a better way and will give less jolt to the economy.