In the days after Chrysler's Chapter 11 filing, people are watching closely to see if consumers are still willing to buy cars from an automaker that's in bankruptcy court.
The industry has warned that carmakers can't go into Chapter 11 like other companies, because people won't buy a car from a bankrupt automaker.
But there's evidence at dealerships around the country that people are still willing to shop for Chrysler vehicles. Some are bargain hunters. Some are there out of a sense of duty, trying to do something good for their country. And others may just want a Chrysler, Dodge or Jeep and are ready to buy.
Still, dealers are nervous. They worry whether they'll be around in a few months, once Chrysler gets around to closing some portion of its 3,200 dealers, a number it says it wants to trim. They worry that production shutdowns — Chrysler has closed its plants for at least a month — will leave them without anything to sell in a couple of months. And they worry, mostly, about the uncertainty of what's to come.
Like any good salesman, though, dealers are trying to put an optimistic spin on the situation. "America loves an underdog," says Alan Wilson, president of Howard Wilson Chrysler-Jeep-Suzuki in the Jackson, Miss., metro area. "America has always rallied to people when they are down on their luck."
Consumer website Edmunds.com says Chrysler dealers got an initial bump in interest after its bankruptcy filing. Web searches for Chrysler products jumped 15%, Edmunds says.
"Maybe the Chrysler bankruptcy announcement attracted the bargain shoppers, who may think a bankruptcy is the same as liquidation with price-busting clearance sales," says Michelle Krebs, editor of Edmunds.com's AutoObserver.
Dealers back that up. They say customers are coming into the showroom and making outrageously low offers, expecting dealers to take any price just to sell a car. Edmunds.com's most recent data indicate that Chryslers already were selling for an average of 18.1% below sticker price before the bankruptcy filing. The industry average discount is 15.6%.
Some people are overly optimistic about markdowns. Gary Burnett, sales manager at Bill Luke Chrysler, Jeep & Dodge in Phoenix, says one buyer wanted a 75% discount.
"That's a $25,000 car right there," Burnett says, pointing to a shiny 2009 Dodge Journey. "A guy came in and offered me $6,000 for it, including tax and license. He said, 'Well, you guys are going bankrupt anyway …' "
What does bankruptcy mean?
Not everyone knows what it means for Chrysler to be in Chapter 11, which leaves some people believing cars will be sold off in a fire sale because Chrysler is going out of business.
The truth is, there's a chance Chrysler could face liquidation. That would mean the Chrysler as we know it — the U.S.-based carmaker that produces Chrysler, Jeep and Dodge brand cars and trucks — would be sold off for its parts, possibly splitting the brands and selling off the factories and machinery.
But we're not at that point. Far from it. The automaker is in court attempting to restructure its debt, something that doesn't affect the average consumer. It's closed its plants temporarily, but dealers are still selling cars, and the company is still operating. Chrysler is trying to get a judge to agree to let Italian automaker Fiat take control of its operations and to force debt holders to agree to take shares in the new company.
Dealers will hear soon whether they've made the cut, but Chrysler hasn't said when it'll make the notifications. So far, Chrysler hasn't said how many franchises it seeks to slash nor revealed the criteria for deciding who goes. It's attempting to get through bankruptcy quickly, in 60 days or less, and last week a major hurdle to that was overcome. Dissident lenders who sought to strike a better deal than Chrysler had offered for their bonds gave up and disbanded.
Chrysler will push the court to help it dispose of unwanted dealers, although dealers may fight back. Cutting dealer ranks could affect customers eventually if it means a dealer they've bought from in the past no longer sells Chryslers.
When customers raise concerns about Chrysler's business woes, "You inform them there's different types of bankruptcies, and we're not in the bad one," says salesman Jonathan Prater of Canandaigua Chrysler in Canandaigua, N.Y.
Still, all the unknowns are leaving dealers fielding questions they don't quite know the answers to.
"Do you know if you're getting the new Challenger SE model V-6 with the five-speed automatic this spring?" Henry Pilichowski asked Bob Weiss, sales manager at Carman Chrysler Jeep Dodge in New Castle, Del. Pilichowski of Wilmington, Del., was waiting for his 2005 Dodge Magnum station wagon to be serviced last Wednesday.
"I don't know, buddy. Everything's up in the air," Weiss said. "Crazy time."
Alan Wilson, president of Howard Wilson Chrysler/Jeep/Suzuki in Jackson, Miss., says he's worried about having enough cars and trucks on his lot later this summer. Last year, he scaled back inventory because sales were starting to fall. With Chrysler's plants closed, he's in serious danger of running out.
He says he has about two to three months' worth of inventory on his lot.
"If my factories are down for two months, and it takes six weeks to get a car shipped, do the math: I'll be out of cars by August," he says.
And will the dealership even be here in six months? That's something that nags at dealers even as they try to paint an optimistic picture.
Larry Giacchino, owner of Carman Chrysler Jeep Dodge in New Castle, Del., says it takes him about 30 seconds to fall asleep at night because he's not worried at all about the business. Later, though, he acknowledges he fears he may get bad news in the mail soon, when Chrysler notifies dealers who they plan to close.
Giacchino thinks he's well-positioned to survive with a clean, new building on a local highway and a full range of Chrysler vehicles. "I'm knocking on wood," he says.
In Phoenix, Kim Carter, general manager at Bill Luke Chrysler, Jeep & Dodge, says he realizes some dealerships need to be closed.
"It needs to be done," he says. "I hope ours isn't one of them. But there are too many dealers … too much inventory."
Despite worries and confusion, dealers have found one of their most important roles has become being cheerleaders for their staffs through the tough time and talking up the future.
After enduring a tough sales weekend following Chrysler's bankruptcy filing, Jackson dealer Wilson told his sales staff to take their spouses out to dinner on him. "They worked hard, and it has been an emotional and mentally stressful time," he says.
'We have to sell cars'
Wilson had a meeting with employees the day after the filing to pass on all the information he had about the car company's future, prospects for new inventory and how the dealership planned to carry on.
"I told them, 'The thing is, guys, we have to sell cars,' " he says. "We've got 60 employees here who have to take a paycheck home. What they do in Washington, D.C., or Detroit, Mich., I can't control."
In Phoenix, Carter says he's had to reassure customers who are worried lifetime warrantees won't be honored or that parts might be unavailable if Chrysler folds.
"We told them, 'Everything is going to be OK,' " Carter says. "And that was the truth, because we were told all along that what the press was publishing (about Chrysler's demise) was not the true facts."
Now, he says, he's looking forward to selling Fiats, the small Italian cars with better gas mileage. Things will be especially good if gas prices go up again.
"We're going to be a brand-new company now," he says.
Contributing: Maureen Milford of The (Wilmington, Del.) News Journal, Chris Joyner of The (Jackson, Miss.) Clarion-Ledger, Matthew Daneman of the (Rochester, N.Y.) Democrat and Chronicle and Dennis Wagner of The Arizona Republic.