Chrysler to talk to dealers on cuts soon
February 10, 2008
By TIM HIGGINS
FREE PRESS BUSINESS WRITER
SAN FRANCISCO -- Chrysler LLC plans to begin detailed discussions with its Detroit-area deale
rs in the next 90 days about consolidating about half of the region's outlets.
Steven Landry, Chrysler executive vice president for North American sales, told the Free Press on Saturday that the Auburn Hills automaker first broached the idea of a major streamlining to area dealers about a year ago.
The company plans to return to them over the next three months with a new discussion that aims to eliminate possibly 25 of 44 Detroit-area dealers.
Landry stressed that having 19 metro Detroit dealers for the Chrysler Dodge and Jeep brands is not necessarily the goal, but rather a starting point for discussions about the direction of the consolidation.
"The 19 is the starting point. They might come back and that 19 might end up being 24 or 25," Landry said. "If the question is: Is the Detroit market over-dealered? The answer would be ... yes."
The stepped-up efforts are part of Chrysler's game plan under the majority private ownership of Cerberus Capital Management and come as the money-losing automaker is rapidly working to realign itself with the hopes of becoming a smaller, profitable car company.
Chrysler plans to significantly reduce its future product offerings, with hopes of eliminating models that compete against each other for customers and for internal resources. The company's two minivans, the Dodge Grand Caravan and Chrysler Town & Country, are examples of arguably redundant models for a dealer selling both the Chrysler and Dodge lineups.
Chrysler also plans to add some new models in areas that it lacks and is in talks with other automakers about using their platforms -- with a Chrysler-styled body on top -- to be sold under a Chrysler brand, Chrysler President Jim Press said Saturday during a meeting with reporters. Chrysler executives are in San Francisco meeting with dealers during this weekend's National Automobile Dealers Association annual convention.
Under the new product plan, dealerships that sell only one of Chrysler's three brands -- Chrysler, Dodge or Jeep -- will not have enough models to sell to remain profitable, Chrysler executives have warned. The company wants all of its dealerships to sell all three brands under one roof.
The company is focusing its consolidation on large and medium markets, noting that 80% of its rural dealers already have three-in-one dealerships. Executives are taking their market research to dealers to show what the automaker says is the right number of dealerships that each market can support.
One-on-one discussions between Chrysler and dealers in the Boston area have already begun
, Landry said.
Chrysler's market studies project that Boston's 22 area dealerships need to be reduced to 10, Landry said. Boston-area dealers average about 450 vehicle sales per store each year, Landry said, but that figure "really needs to be ... over 1,000; it's got to be close to 1,200."
"These dealers need to make double and triple net income and profit than what they're making today," Landry said. "That takes investment, of course."
Top Japanese brands average more than 1,000 sales per store, while few Detroit-brand dealers average even half that volume.
Press has warned that the automaker doesn't have the finances to write big checks to dealers to entice them to leave. Rather, he said Saturday, the company will turn to its other resources to help close deals between the dealers and other interested parties.
Aid could come in the form of special financing rates from its financial cousin, Chrysler Financial, Landry said.
Also in San Francisco, General Motors Corp. Chairman and CEO Rick Wagoner touched on the automaker's own consolidation strategy as he spoke at the opening of the NADA convention.
"At GM, we believe the decision to close or consolidate dealerships has to be a mutual decision between individual dealers and their" automakers.
He added, "Our goal is to ensure that those dealers who choose to leave the industry do so with dignity, and that in every market, we work with our dealers on a franchise footprint that improves their throughput and profitability."
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Chrysler to talk to dealers on cuts soon