Rejected Chrysler dealers look for a Plan B

Chrysler terminated its relationship with 789 dealers Thursday. General Motors could do the same with 1,000 dealers Friday.

Seth Perlman/AP
Pike County Chrysler Center in Barry, Ill., is one of the 789 dealerships that Chrysler wants to eliminate as part of its restructuring process.

Car dealer Jim Bickford knew he was going to get a letter from Chrysler Thursday. What shocked him were the contents. He had thought his dealership would be safe: It had outperformed Chrysler nationally, it had good customer-service ratings, and it was the only Dodge outlet in Boston.

Yet when Mr. Bickford and his brothers gathered together and opened the letter in silence, they learned that Westminster Dodge was one of the 789 dealerships Chrysler no longer wanted.

“I can’t fathom it.… I just can’t believe it,” says Bickford, whose family has sold Chrysler cars since 1977. “We live and breathe Chrysler…. We were absolutely shocked.”

As part of its bid to move out of bankruptcy as soon as possible by shaving costs, Chrysler on Thursday announced its plan to cut about one-quarter of all its dealers nationwide. General Motors is expected to take similar steps, terminating its relationship with about 1,000 dealers, perhaps as early as today. The formal list was filed in a Manhattan bankruptcy court Thursday morning.

In three weeks, Bickford will lose his franchise rights, meaning he can no longer sell Chrysler cars. Just a day before the letter arrived, Bickford had received a shipment of seven new cars from Chrysler. If he can’t sell them or any other car on his lot by June 9 – a nearly impossible prospect – he might have to sell them to other dealers for pennies on the dollar.

“I’m angry. I’m hurt,” says Bickford. “I guess we still have visions of being able to file a protest, and perhaps get some assistance, to have them reconsider their decision.”

Some Chrysler franchises that received the bad news Thursday – referred to by the company as “rejected dealers” – do plan to appeal the decision. But such moves are unlikely to change the ruling, says Robert O’Koniewski, executive vice president of the Massachusetts State Automobile Dealers Association.

“I don’t think there’s a light at the end of the tunnel here,” he says.

What they can do is try to arbitrate a whole range of issues – including how to deal with excess inventory. But the matter of which dealers got the axe is probably final, he adds.

In a statement, Chrysler said the 789 dealers represented 14 percent of the company’s sales volume. Lessening competition among franchises would help the surviving dealerships – and the company as a whole – be more profitable, the statement said.

“These are extraordinary times, and they call for an extraordinary response,” said Steven Landry, an executive vice president at Chrysler, in the statement. “It is important to our dealers and to our customers that these steps be completed quickly and seamlessly as we transition to a new Chrysler.”

Though the 40-page list of “rejected” dealerships represented a wide range of sizes and geographic locations, a few themes emerged. Standalone dealerships – those that only carried one of Chrysler’s brands, like Dodge – were more likely to be shuttered. Most were also relatively small, with sales volumes under 100, Chrysler said.

For Paul Connor, owner of Mansfield Jeep in Mansfield, Mass., the day passed with a great sense of relief – his was among the saved dealerships.

“We’re going to do a little celebrating and then go back to work and work hard,” Mr. Connor says. “I felt like I was a college football player on draft day, wondering if I was going to be picked…. We got the news in a one-page letter. It was just really weird – a one page letter, it’s a strange feeling.”

Some GM dealers have watched their Chrysler competitors with interest – and a palpable sense of foreboding. With letters possibly fanning out to thousands of GM dealers today, few are sure what will happen come this afternoon.

“Everybody’s nervous… There’s a chance we could be selling hot tamales next week,” says Jerry Groetsch, head of Crown Buick Pontiac GMC in Metairie, La.

But he’s confident his dealership will make the cut. “We’re one of the top producers, and we sell all GM products.”

What, exactly, happens to Westminster Dodge and the 788 other rejected Chrysler dealers remains to be seen. Some will convert to used car lots, and many will maintain relatively profitable service components – fixing cars they’ve already sold. But many employees are sure to lose their jobs.

John Donoghue, the finance manager for Westminster Dodge, is still trying to process the news he got from his boss when he walked in the door for work Thursday. But at least he has a plan for where he wants to go next: Palm Beach.

Mr. Donoghue, who has been with the dealership for most of his 28-year career, hopes to take advantage of the depressed real estate market in Florida to find a good deal and take things easy.

“If Westminster was here for another 10 years, then I would be here for another 10 years,” Donoghue says. “Call this Plan B.”

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