Car dealer Jamie Auffenberg knew he would get a letter from Chrysler Thursday. He just didn't know what it would say.
When he opened the U.S package Thursday morning, he found a letter saying Chrysler is terminating the franchise for his Chrysler/Jeep store in O'Fallon, Ill. His brother Chris operates four Chrysler-branded stores in Missouri and was told that two would close.
"I didn't see this coming," Auffenberg says. Even after talking to Chrysler later in the day, he still wasn't sure why his store, or his brother's, were cut. He says recent tax trouble, for which he was cleared, was not cited.
Many car dealers, independent businesses with franchise agreements with the automakers, are family-run stores staying in the same bloodlines for generations.
As Chrysler announced its closings Thursday, several families were dealt blows. Kim Hendren in Pineville, Mo., was told his stores would stay open. His son Mark Hendren was told his Neosho, Mo., store would close.
"It's kind of overwhelming to get a letter that says goodbye," says Alan Wilson, a Chrysler/Jeep dealer in Jackson, Miss. Wilson is keeping his franchise, but his brother Doug, who operates the Dodge dealership on the same property, is facing closure. Wilson says his brother is dealing with "the emotional stuff and the pragmatic stuff. ... It's obviously very difficult."
On Thursday, Chrysler announced it is cutting off 789 of its nearly 3,200 dealers by June 9. Dealers across the nation said they were saddened by the news.
"It's a sad day for America when, with the stroke of a pen, dealers that have been in the community hiring local employees and paying taxes are suddenly wiped out," says Howard Kuperman, owner of a Jeep store in Port Jervis, N.Y., who was told it would close.
Chrysler, which is operating on government loans and filed for bankruptcy reorganization this month, says it decided which dealers to cut based on sales, customer satisfaction rates, how much capital they have on hand and whether the dealer sells all three company brands under one roof.
"This is a difficult day for us, and not a day anybody could be prepared for," says Jim Press, Chrysler's president and vice chairman. "There are no winners. There are no losers."
After struggling for years to trim its dealer network, Press says, the automaker is taking advantage of the fact that being in bankruptcy court frees it from state franchise protection laws. "The bankruptcy process does allow us a once-in-a-lifetime chance to accomplish a right-sized, realigned dealer body," he says.
The auto industry overall supports one in 10 U.S. jobs, according to the Alliance of Automobile Manufacturers. Dealers alone employ more than 1.1 million and generate nearly 20% of retail sales in most states. The National Automobile Dealers Association estimates Chrysler's closures affect more than 40,000 jobs.
"We believe that these draconian dealer cuts are not only misguided but counterproductive," NADA said in a statement. "Fewer dealers mean less revenue for the automakers. Dealers are the manufacturer's customer. They buy the cars and parts and even the signs in front of their dealerships."