By on July 16, 2007

micks.jpgAutomotive News [sub] reports that the Chrysler Corp. has banned 463 (out of 3700) dealers from its dealer-only used car auctions. Their crime? Failing to meet 50 percent of their new car sales target set by the corporate mothership. In fact, many of these stores have become little more than used car dealers specializing in late model, low-mileage Chrysler product. Representing the banned dealers, Doug Alley of Alley Chrysler in Kingsport, Tennessee says the company's goals are unachievable: "We got no choice but to be in the used-car business if we want to stay in business." Representing Chrysler, Steven Landry, Chrysler executive vice president of NAFTA sales, global marketing, service and parts, says once Chrysler notified dealers that the rule was going into effect, "it was amazing how many dealers propped themselves up over 50 percent." What's the bet that the booted dealers will sell someone else's product?

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16 Comments on “Chrysler Bans 463 Dealers from Its Used Car Auctions...”


  • avatar

    I have to wonder how long the dealers that managed to squeeze out 50% will last? I mean I imagine they just incentivesed the hell out of the new car side to keep their profitable used car business. They probably can’t do that forever, especially if some of them get “interesting” new car product mixes.

    It isn’t a bad way to get rid of dealers though, I mean without used cars a lot of dealers would be dead already.

  • avatar

    yasth:

    “It isn’t a bad way to get rid of dealers though…”

    The same thought occurred to me.

    Like the other Big 2.8, Chrysler’s dealer network is obese. (Toyota has 1700 dealers). Starving Chrysler dealers to death ain’t the prettiest or friendliest solution, but it could well be the plan.

  • avatar
    Alex Dykes

    Sounds like a good way to prune the bloated dealer network.

  • avatar
    Landcrusher

    How many of these guys are going to take Chrysler’s name down with them though?

    If these guys really have to push new cars out the door at a loss to stay in business, how slimy will they get to keep making a profit?

    “Bad Credit. No Problem” coming to a Chrysler dealer near you.

  • avatar

    We have a winner!

    Yes, it is a good way to get rid of under-performing dealers (that you already have to many of, by the way). You don’t take away their dealership (lawsuits, you know), but you try to make it easier for them to decide to leave.

    B Moore – Autosavant.net

  • avatar
    borderinsane

    There will be hedge-fund-type of returns to the finance guy that figures out how to incentivize dealers to mutualize their holdings. E.g., close up their own shop for a share in the profits of a regional Chrysler dealership holding group.

    Hey, Cerebus, did you get that?

    (Note: My count is 26 Detroit-area Chrysler/Jeep/Dodge dealers, only 9 Toyota dealers.)

  • avatar
    AGR

    What stops the booted out dealer from buying a vehicle sold at a dealer only auction from another Chrysler dealer who attended.

    The following day (after the dealer only auction) they sell the rest of the vehicles at an “open auction”.

    The franchised new car dealers are increasingly becoming used car dealers, with the “independent used car dealer” slowly and inexorably getting the “squeeze”.

  • avatar

    They have 9 Toyota dealers in Detroit?
    Thats saying something

  • avatar
    acehunter

    Two smaller Chrysler dealers here in the San Francisco Bay Area recently closed their doors, one in Alameda (across the St from a Toyota dealer — the only other new car lot in town — that does MASSIVE business) and one in Lafayette, which was the only new car lot in town.

    Maybe it’s working…

  • avatar
    andrewg

    They have 9 Toyota dealers in Detroit?

    Check out the # in our nation’s capitol region.

    Now thatsays something!

  • avatar
    jrlombard

    The question that’s been floating around in the back of my mind for a while is: Which marque will be the first to have a network of wholly owned company dealerships? Why not control all facets of the customer experience? Not sure if that’s been mentioned…

    Is Cerebrus moving that direction?

  • avatar
    borderinsane

    @andrewg: I count 13 in the DC area. (lotpro.com)

    @jrlombard: Auto manufacturers may have a problem owning Dealershisp in some States. States governments license car dealerships. My understanding is that auto dealer laws sometimes prohibit the manufacturer from being the dealer as well. (Something about franchise laws, if I remember correctly.)

  • avatar
    Steven Lang

    This isn’t very surprising at all. Ford has already undergone a consolidation of 20% to 40% of their dealerships in given regional territories over the past three years.

    On the other hand, Chrysler really hasn’t streamlined their dealer networks at all. The old guard had a very strict ‘hands off’ approach to the dealer networks when it came to the consolidation issue. In fact, while Ford & GM have repeatedly awarded old dealer territories to the larger players, Chrysler has embraced more independents.

  • avatar
    Terry Parkhurst

    Forgive me for saying it, but I really do feel for any Chrysler dealer; and it is not because the product is that bad, from my own, rather limited experience. I drove the 2007 Jeep Wrangler Rubicon, about 6 weeks ago, and it impressed me with the “bang for the buck” factor, as well as its fit, finish and the straightforward nature of its industrial design.

    I am just getting some seat time in the Chrysler Pacifica and the engine and transmission seems impressive with good throttle control and the AutoStick option ensuring some driver fun. But my God, the price is just nonsense: $38,000 (approximately)! Now, I am assuming that is because some of the aforementioned mechanicals are from the Mercedes parts bin. But as anyone who reads this site knows, hardly anyone – well, maybe no one – is going to pay $38,000 for a four door van with a Chrysler moniker on it.

    So yeah, when the Chrysler salespeople see a “mooch” they’re going to “mouse him, front and back” as the old time car sales professionals used to say; because they’re going to make money, as they can, on the financing. Either that, or indeed, they are going to have to buy all the used cars at auction they can, and get as much as they can for them. They’ll keep doing that game of musical chairs until they are forced to sit down; and of course, there sure won’t be enough chairs for everybody.

  • avatar
    Glenn 126

    Kind of a “catch 22″ situation, isn’t it?

    The big 2.8 try to cut away the fat from their morbidly obese dealer networks – good for them, since they need their dealers to be able to make money to stay on board.

    Except that a lot of these dealers are going to be willing, able and “ready to get a little revenge in” when (not if) the Chinese car companies start coming along selling vehicles, not to mention the Indian companies.

    You know, like Geely; Visionary Vehicles (whatever brand they decide on); Brilliance (they’d better work on their crashworthiness first); Chery (surely they were smart enough to have a stipulation in their agreement with Chrysler allowing them to also sell their own brand in the US – they learned from Mitsubishi’s mistake or else they are stupid); Chamco (SUVs to start, in about 18 months, starting at under $14,000 brand new); possibly SAIC (“partners” with GM and VW but they have “aspirations” to bigger things after stealing whoops I mean learning the tech from their “partners”) and also Nanking (which just bought MG’s badge and tech and plant some months back). MG, by the way, includes not only just the 2 seat sports car (mid-engine) but also the large saloon (sedan), with V6 (about the size of a new VW Jetta or Kia Optima).

    As for the Indians, there is Mahindra & Mahindra, which already sells tractors here successfully (and who are planning on selling diesel SUVs at a very attractive price); there is Tata which may or may not come to the US but which are one of the largest companies in India (and who’s net worth as a solvent corporate conglomerate apparently exceeds General Motors, shockingly).

    The Chinese are coming! The Chinese are coming! The Russians already tried selling Ladas in Canada and the UK and succeeded (somewhat) for awhile – but Russians don’t appear to be able to learn as quickly or as well as the Chinese, so they buy tech, then just keep building the same thing for decades and thus fall behind again. I guess that at least is better in one way than the Chinese, who aren’t shy about simply stealing tech and using it.

  • avatar
    Celinesanderson

    That is so many bans! If they can’t meet their goals to sell these cars then something needs to happen. This was interesting to see sells in a dealerships perspective. Thanks for sharing!
    Celine | http://www.usedcarsinlehighvalley.com


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