Judge Rules Chrysler Can Cancel Dealer Franchises
By Michelle Krebs June 9, 2009NEW YORK - U.S. Judge Arthur Gonzalez, who is overseeing the Chrysler bankruptcy proceedings, ruled Chrysler can, indeed, terminate the franchises of 789 dealers.
Gonzalez issued the order late Tuesday afternoon that the Chrysler, Dodge and Jeep dealerships designated by Chrysler to be terminated at midnight can no longer act as authorized dealers, effective immediately.
The ruling comes as now surprise as bankruptcy law superscedes state franchise laws. The rejected dealers had made a last-ditch effort to plead their case.
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According to Bloomberg, the targeted dealers sold 16,000 vehicles in the month of May, an average of 20.2 units/dealer.
Unless these stores have other lines and strong back-end operations, it's impossible to imagine that the closing dealerships were making money on Chrysler products. And it's important to remember that only the Chrysler marques were pulled--many of these shops sell other vehicles (at much higher volumes than Chrysler products).
Despite the rhetoric, the plan was necessary. Now let's see whether GM can make the same hard choices that Chrysler did.
I doubt it.
Canceling the dealers was the worst thing to do. If dumping 25% of the dealers was such a good idea, then dumping another 25% would have been an even better idea, right? Wrong.
Chrysler just killed its customer base. These shoppers aren't going to drive 20+ miles to another Chrysler dealer when there is a Ford, Toyota, or GM dealer in town. My parents live in zip 94402. Look it up on Dodge's website. The nearest dealer for almost 2,000,000 potential buyers is 20 or more miles away.
If the dealers are expendable, so are the customers. That would be my interpretation of how Chrysler and the courts handled the situation.
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