Thursday, May 14, 2009


Chrysler notified 789 dealers today that the company will ask the bankruptcy court to allow it to reject the dealers' franchise agreements. Unfortunately for those dealers, they will have no recourse to argue otherwise with the bankruptcy court. The only real argument will be about the terms and conditions of the closures. Dealers who have been loyal to Chrysler for years really have no where to look. We should expect the majority of these dealers to file for bankruptcy themselves in the near future.

The question I have is did Chrysler cut enough dealers? The 789 dealers represents approximately 25% of Chrysler's dealers. Interestingly, 50% of Chrysler's dealers are responsible for 90% of its sales. Given the fixed and variable costs attendant to supporting a dealer and the need for radical change, I wonder why Chrysler didn't cut 40-50% of its dealers to implement radical change. In my experience, bankrupt companies with retail locations never enough locations on the first round. Hope springs eternal that the revenues of the open locations will rebound.

Cheers, Mike

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