Another aspect of these dealership closings is that some of them (at
least in the US) sell cars made by multiple manufacturers. So in those
cases, when GM or Chrysler cuts them, they can fall back on selling
And in the case where a GM or Chrysler dealership sells only GM or
Chrysler cars, then if their franchise gets pulled they might end up
getting a franchise from Toyota or Honda or some other foreign brand.
But in any case, apparently no Chrysler dealerships to be closed in
On the other hand, GM told 240 Canadian dealers (by e-mail) yesterday
that their franchise will be pulled (thats 240 out of 705 currently
operating). So GM is cutting about 33% of it's dealerships, even though
it is forcasting a drop of 12% in Canadian sales for 2009 compared to
2008. The franchises get pulled in October 2010.
"The automaker will pay dealers in large urban markets $2,000 per new
vehicle they delivered last year as compensation, one industry source
said." GM Canada is bound by franchise contracts with every dealer
that typically last five years.
Something else to consider: For all those GM and Chrysler dealerships
to close, all their specialized tools and computers will be sold to the
open market. That means small, independent service garages will be able
to perform sophisticated diagnostics and repair on newer GM and Chrysler
vehicles with that used equipment that presumably they can't currently
And all the parts inventory that the dealerships have will also find
their way to independent service shops.
Canadian Chrysler dealers spared the axe
Nicolas Van Praet, Financial Post
Published: Thursday, May 14, 2009
Danny Roy got a United Parcel Service letter from Chrysler LLC on
Thursday telling him he wasn't needed anymore to sell the automaker's
Dodge Ram trucks and Town & Country vans. The only thing saving him now,
he says, is that he also sells Chevrolets.
"We're mad. We're shocked," the North Dakota dealer said in an interview
last night. "It was a very big surprise. We're the only Chrysler dealer
for [miles and miles]."
Mr. Roy's D&B Motors in Langdon is one of 789 new-vehicle dealers in the
United States Chrysler wants to weed out by June 9 as it scrambles to
shrink its business. The automaker has asked the U.S. Bankruptcy Court
for approval to cull its 3,200-strong dealer body by roughly one
Mr. Roy is wondering why he's the unlucky one. A 10-minute drive north
up Highway 1 from his dealership is the Manitoba border. And in Canada,
Chrysler is not touching a single dealership.
Unlike in the United States, where many Chrysler dealers sell models
from other manufacturers, almost all the automaker's Canadian dealers
sell only Chrysler's three brands. The company engineered that seven
years ago to give its dealers enough scale to stay profitable.
"Over time, economics kind of smoothed everything out and the dealer
count in Canada is now at a point which we're comfortable with," Steven
Landry, Chrysler sales and marketing chief, told reporters on a
Mr. Landry said there are pockets of the country where the company may
have too many dealers, namely in Toronto and Montreal. But he said
Chrysler would work that out through the course of normal business.
By filing for bankruptcy protection in the United States, the automaker
is able to break its dealer contracts. By choosing not to file for
creditor protection in Canada, it may be missing an opportunity to cull
its 450 dealers here.
Chrysler may have 30% too many dealers in Canada, said Michael Lewicki,
lead partner of RSM Richter's Automotive Group. The automaker's sales
this year are down 31%, worse than the industry's 20% decline. Its
market share has shrunk to 12.6% from 14.6%. And with the bankruptcy
shadow hanging over it, it may be difficult for dealers to boost
business without resorting to heavy discounting. "You have these
dealers, some of whom are making money, many of which are not," Mr.
Lewicki said. "The guys that are not, how long can they bleed without a
solution on the table?"
Chrysler's Canadian dealers are more profitable than its U.S. retailers,
Mr. Landry said. But statistics and anecdotal evidence suggest they are
far from the picture of perfect health.
By one measure, dealer throughput, Chrysler dealers trail many industry
rivals. Chrysler retailers sold 514 vehicles per dealership in 2007
while Toyota dealers sold 786 per dealer and Honda sold 699. Another
measure, return on sales, is not publicly available.
General Motors Corp. has said it will chop about 300 Canadian dealers
from its current stable of 705. Sources say the company has not
communicated with its dealer base at all to indicate which dealers are
being cut. In the United States, GM will notify at least 1,000 dealers
by Friday that it considers their franchises underperforming.
Job losses from the dealership cuts are difficult to estimate because
some dealers may continue operating by focusing on used cars or
servicing vehicles. Dealers selling new cars in Canada now employ
140,000 people nationwide.
There is no appeal process for dealers that are chopped, Chrysler said,
and they will get no compensation. Almost half the dealers deemed
surplus sell less than 100 new vehicles per year.
"Is there a more humane way we could do it? No," Chrysler vice-chairman
Jim Press said. "This isn't a game of win and lose. This is bankruptcy."
Chicago dealer Stanley Balzekas characterized the notification as a
"screw you" letter because it was cold and very factual.
"They want every dealer to be a huge dealer," said Mr. Balzekas, whose
Chrysler-Jeep dealership on the South side of Chicago has carried his
family's name since 1926. "In an urban area, that doesn't work because
of the cost of land."