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Chrysler shutdowns create dealer headaches

May 13, 2009

As the shutdown of Chrysler plants in Canada and the United States enters its second week, some dealerships across Ontario are starting to run out of popular models.

“I’m down to two minivans,” Mike Herbert, owner of Leamington Chrysler, said Tuesday. “They’re not building them anymore and during the shutdown they’re not shipping them either.”

Herbert said dealers are turning to each other to help ease product shortages. “We have been able to secure some products by doing swaps with other dealers in the province,” he said. “A lot of dealers are short of vans at this point.”

Other models — such as the Dodge Charger — are also starting to dwindle in numbers, said Herbert.

Last month Chrysler announced it would suspend production at its factories in North America and start building cars again when its bankruptcy restructuring was completed. It said it anticipated that to be within 30 to 60 days.

Chrysler had 86 days worth of inventory in North America as of April 1. That translates into a 26-day supply for dealers if the Detroit automaker exits protection in 60 days.

Not all dealers are hurting for product. Leo Racicot, owner of a dealership in Amherstburg, said he ordered enough vehicles —about 200 — in February to carry him through the next two to three months. Dealers who “played it safe are paying the price. We’re lucky because we stocked up.”

Racicot said he has been supplying dealers from across Ontario, including some from Toronto who are desperate for stock. “Some are starting to run out of everything,” he said.

Despite plunging sales across North America, dealers like Herbert are reporting relatively strong sales thanks to consumer incentives.

“We’re running short on some vehicle lines. There’s still some good deals to be had on the cars that we have, problem is we don’t have enough of them.”

But so far, “business is good. I can’t complain.”

Last week, Chrysler Canada followed its U.S. parent by unveiling a series of rebates and incentives targeting 2009 vehicles.

Michael Hatch, chief economist at the Canadian Automotive Dealers Association, said the uncertainty surrounding General Motors and Chrysler prompted many dealers to place smaller, more frequent orders, rather than larger ones. “They’re not ordering as much at one time,” said Hatch.

He said there should be “months of inventory” in the system and dealers generally are not facing critical shortages.

Despite the upheaval in the auto industry, Herbert said he was optimistic about Chrysler’s future. “It looks like the ducks are going to get in a row,” he said of Chrysler’s merger plans with Italian automaker Fiat. “Hopefully it’s going to be a shorter period of downtime as opposed to a longer period.

“I’m optimistic that Chrysler is going to emerge from this stronger and globally competitive, and dealers and employees in Canada are going to feel very secure.”

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