Committee of threatened US dealers to fight for survival in court
20 May 2009

Chrysler’s plans to terminate almost a quarter of its US dealer franchises as it bids to restructure itself in the US bankruptcy courts have been challenged by the dealers themselves.

A group called the Committee of Chrysler Affected Dealers, which represents almost 300 of the affected franchises, yesterday filed papers to the bankruptcy court asking it to delay hearings that would allow Chrysler to shut down 789 US dealers.

Stephen Lerner, a lawyer representing the committee, said: “Chrysler's proposed asset sale and request for immediate termination of the dealer franchises will destroy several hundred independent businesses, ruin the livelihoods of their owners, cause the loss of thousands of jobs and precipitate inevitable personal and business bankruptcies."

The issue at the heart of the committee’s challenge is the idea that Chrysler’s slashing of its dealer numbers will help to return Chrysler to profit. The committee argues that this is far from the case.

“There is no evidence that by rejecting dealership agreements New Chrysler will save money to any material degree,” claimed court documents filed last week by the Chrysler National Dealers Association. “Dealers produce revenue, not expense, for Chrysler ... it is Chrysler's dealers that bear the risks and costs associated with selling Chrysler's cars to the public.”

Chrysler argues that its dealers are so numerous that they compete not only with each other, but also with themselves. Last year, Chrysler sold roughly one million new cars through 3300 dealerships; over the same period Toyota sold 1.6 million through just 1200 dealers.

Matt Rigby

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