Chrysler to Shutter 789 U.S. Dealerships

May 14, 2009 — -- Chrysler plans to eliminate a quarter of its showrooms, some 789 dealerships, in an effort to cut costs and keep existing dealers from competing with one another, the automaker revealed in bankruptcy documents filed today.

Chrysler, which filed for Chapter 11 at the end of April to begin a merger with Italian automaker Fiat, told the bankruptcy court Thursday that its dealer network was inefficient, expensive and antiquated.

The network of 3,200 dealers currently operating across the country "substantially increases expenses and inefficiencies in the distribution system," the company said in a motion filed in the U.S Bankruptcy Court in New York.

Pending approval by the court, the company plans to shutter underperforming dealerships by June 9.

The company said it targeted poor performing dealers, those that sold a single brand -- Chrysler, Dodge or Jeep -- and those in areas, particularly cities, where dealers competed with one another. Though the company is losing 25 percent of its dealers, those dealers provided only 14 percent of sales volume, Jim Press, Chrysler's vice chairman and president, told reporters Thursday.

Chrysler, which took a $4.1 billion loan from the government, has seen a 46 percent drop in sales compared with the first four months of last year. It reported a $16.8 billion net loss for 2008.

"The bankruptcy process allows us a once in a lifetime chance to realign the dealership body," Press said. The company, he said, would have a "more profitable and powerful distribution going forward."Chrysler for several years has been trying to consolidate its dealerships so all its brands are under one roof, but many dealers continue to just sell one brand.Wade Walker, a Jeep dealer from Montpelier, Vt., whose family has been selling Chrysler-made cars since 1964, said news that he would have to close his dealership would cost him a quarter of his business and lead to layoffs.

Walker, like the other dealers, was notified by a letter sent by UPS Thursday morning that his business would be closed.