George S. May Business Blog

Chrysler gurantees a home for rejected dealers’ excess stock

Chrysler LLC, who has already announced their plans to eliminate around 25 percent of the current dealerships, has offered those unfortunate dealers a bit of good news in guaranteeing that they will offer assistance finding homes for the dealers’ unsold cars and trucks. Chrysler also extended the previous deadline of June 9, to June 15 for those dealers to sign paperwork that will let them transfer the vehicles to dealerships that will stay in operation.

 ”We are now close enough to guarantee that we will redistribute 100 percent of the affected inventory,” Steven Landry, Chrysler’s executive vice president for North American sales, said in a note to rejected dealers on June 5.

Chrysler wants to trim its dealer ranks from 3,188 under a plan to sell most of its assets to a new company led by Fiat SpA. U.S. Bankruptcy Judge Arthur Gonzalez today is hearing closing arguments in Chrysler’s motion to reject the dealers, even as the Fiat deal was put on hold by a stay issued by the Supreme Court yesterday.

The dealers being eliminated had 42,000 vehicles in inventory on May 14, when the automaker announced which outlets it would keep. The rejected dealers sold 16,000 vehicles through last month.

Those retailers can transfer vehicles to other dealers and get out of their loan obligations or be reimbursed for the price of the vehicle if they pay a $350 inspection and transfer fee. Chrysler has arranged to begin moving the transferred vehicles beginning tomorrow, said Carrie McElwee, a company spokeswoman. 

While this is terribly unfortunate news for those dealers who were declined, these woes are to be expected when dealing with a Chapter 11 filing. As horrible as it may sound or seem, those dealers should feel lucky, in a sense, for being given the option to transfer those cars in exchange for either cash or a relief of their debt.

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