George S. May Business Blog

Chrysler closing 789 dealerships

Chrysler, in its bankruptcy court filing Thursday, is planning on eliminating 789 of its U.S. 3,200 dealerships, blaming an antiquated network and over-saturation for the move.

Chrysler made the filing with the U.S. Bankruptcy Court in New York, admitting in the motion that just over 50 percent of the dealers account for about 90 percent of the company’s U.S. sales.

While this move will save Chrysler a lot of money, the fallout from the thousands of jobs lost, thereby generating less tax money, will likely prove to be devastating for smaller cities  and towns. It must be said, however, those dealers included in the 789 set to close, do have the option to appeal.

Chrysler spokespeople have said that they will not comment upon this issue until they notified the dealers included list.

General Motors Corp. also plans on releasing some bad news this week, notifying 1,100 dealers that it will not renew their franchise agreements when they expire at the end of September of 2010.

Chrysler, in the motion, blamed ever-evolving neighborhoods and communities for the slide in sales at many of the struddling dealers.

“In addition, as suburbs grew and the modern interstate system continued to evolve, longstanding dealerships no longer were in the best or growing locations,” the company said in its filing. “Many rural locations also served a diminishing population of potential consumers. Some dealership facilities became outdated. Other locations faced declining traffic count and declining populations.”

Chrysler has received $4 billion in federal loans and has been operating in bankruptcy protection since April 30. Its sales this year are down 46 percent compared with the first four months of last year and it reported a $16.8 billion net loss for 2008.

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