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Mike Stevens | May 15, 2009

In its continuing fight to stay afloat, Chrysler has announced plans to close 789 Chrysler, Dodge and Jeep dealerships across the US (28 in New York alone) - a figure which represents a staggering 25 percent of Chrysler's 3181 dealers, and 14 percent of the company's annual sales.

The embattled manufacturer aims to have the closures completed by June 9, with the ultimate goal being that the remaining dealerships will form a stronger and more profitable national network.

Before the plan can be put into action, Chrysler must first gain approval from the US Bankruptcy Court, a hearing for which is scheduled for June 3.

"It is critical that the domestic dealer network be reconfigured quickly to create a dealer network that improves the profitability of the best dealers in the best locations,” Chrysler officials said in a statement filed with the court.

Questions have been raised as to whether the manufacturer has the right to terminate dealership agreements within the context of its Chapter 11 bankruptcy.

chrysler-headquarters

According to plans submitted to the US Bankruptcy Court, Chrysler considered factors such as raw sales volume, location, distance to nearest dealer, market share, and relevant demographics like household income and population trends.

"It is with a deep sense of sadness that we must take steps to end some of our Sales and Service Dealer Agreements," said Steven Landry, Executive Vice President, North American Sales and Marketing, Global Service and Parts.

"The decision, though difficult, was based on a data-driven matrix that assessed a number of key metrics."

One thing is a certain: if the US manufacturer is successful in its hearing on June 3, there will be tens of thousands of unsold vehicles washing into the market, further depressing new values and inventory.

To its credit, Chrysler has advised the affected dealerships that it will work with them to arrange the redistribution of new vehicles and parts.

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