By on June 12, 2011

I missed the latest twist in Chrysler’s California dealer drama when I was traveling in Iowa last week, but because it’s such a significant story (and because Ford recently proved how expensive dealer drama can be), we’ll commit the cardinal rule of blogging and take a look at some week-old “news.” California’s DMV won’t report the findings of its investigation into Chrysler’s allegedly non-compliant “company store” until September 29, but the Detroit News has reported that “about 75 percent” of these dealer complaint cases end in settlement and that

Chrysler Group LLC may be on the verge of selling its company-owned flagship dealership in Los Angeles to a private retailer, which could appease angry franchise dealers in California.

So much for ChryCo leaving the state in an angry huff. In fact, angry is about the last thing CEO Sergio Marchionne sounds about the whole thing…

According to the DetN

Chrysler Group LLC CEO Sergio Marchionne said he is not worried about the fate of the prize dealership he hopes will jump-start sales in California, where Chrysler has 6 percent market share compared with almost 10 percent nationwide. In Los Angeles, Chrysler has about 2 percent.

“It is solvable,” Marchionne said this week. “It will all go away.”

Which is an interesting response given that the Motor Village situation seems to be just the tip of the iceberg. Chrysler is making a much wider effort to turn around its underperforming California retail network, and Motor Village is simply the most egregious case since Chrysler owns the entire dealership outright. That, in itself, won’t be hard to solve, as Troy, MI-based Suburban Collection will simply buy the store instead of operating it on a trial basis for a year first, as it had planned to. A Suburban exec says a decision will be made to sell to his firm or another “in the next few weeks,” calling the situation “a ticking time bomb relative to timing.”

But what of the “California Superstores” network, where Chrysler Real Estate is also buying prime location and offering low-cost rent to a favored operator? The California New Car Dealer Association had Motor Village dead to rights with a thoroughly convincing complaint, but California Superstores could be a tougher nut to crack. But if the CNCDA is motivated by a desire for “fair competition,” it’s probably just a matter of time before California Superstores gets attacked for its cozy low-rent deal with Chrysler Real Estate. Chrysler knows it’s lost the first battle, but it will fight back if its California dealers press home their advantage by going after the Superstores network. The war is only just beginning…

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8 Comments on “Will Chrysler Sell Its California “Retail Laboratory”?...”

  • avatar
    John Horner

    Didn’t I say that there was no way this situation was going to end with Chrysler leaving California? That very idea was and is preposterous. California alone is an automotive market several times bigger than all of Canada.

    As far as sweetheart real estate deals go, it will be tough to prove that Chrsyler is doing anything underhanded in that regard, Commercial real estate values have plummeted in California (as in much of the US) over the past several years, and there really isn’t a bottom in sight. Most of the US is massively overbuilt for retail space of all kinds, including auto dealers. “Strategic defaults” by commercial and industrial users who actually could pay their mortgage if they wanted to are happening every day. So, it will be hard to prove that any given deal is below market, because there isn’t much of a market to compare it to!

    • 0 avatar

      The populations of Canada and California are roughly similar (34 million vs. 37 million). Californians would have to buy an awful lot of cars per capita to make their market “several times bigger” than Canada’s.

      Just sayin’.

  • avatar

    I smirk every time I see that commercial for the “Imported From Detroit” Chrysler 300; which would likely be a mediocre car if not for the “imported from Germany” components from the W210 Mercedes E Class and W220 Mercedes S Class, during Daimler’s ownership of Chrysler. Not to forget the MBenz 4Matic All Wheel Drive System as well.

    • 0 avatar

      I kind of get a kick out of them too, but I’m not laughing as I have been seeing a lot of 200’s around town, so I’ll hold any snide remarks until I hear and see more, but it appears Chrysler may be on to something. For their sake, I hope so.

    • 0 avatar

      The few suspension bits provided by MB are the only positive thing that that merger did for Chrysler. Chrysler, Jeep and Dodge designs took a conspicuous nosedive after the MB/Chrysler merger. I actually thought that Chrysler was pulling Mercedes down, because the german cars certainly didn’t feel over-engineered like they used to. But now that they’re un-tethered from one another, it’s clear from Mercedes’ current designs that they were the ones sucking the life out of Chrysler.

    • 0 avatar

      The parts that Daimler lent to Chrysler for the 300 were the steering column, telematics, and rear suspension components, which had to be reworked to be used. For these parts they overcharged Chrysler, as well as “consulting fees”, and the effect was to delay the car by 12 to 18 months. There was nothing wrong with the components Chrysler developed in house, they had already been tested on prototypes going back to the original 300N concept convertible in 2000 which singled the return to rear wheel drive. Then Daimler lied to the press that the 300 was based off the E Class platform, but then said it was an old E Class so as to not upset their customers who overpaid for their cars. None of it was true.

      • 0 avatar

        The manual shifting auto transmission was also from MB I’ve read. Too bad you feel that way about MBs contribution. I actually like the 300 regardless of who designed the parts.

        The 300 is a success. I’ve driven most of the other Chrysler/Dodge products from that era, and those I drove were all substandard IMHO. The PT Cruiser was decent.

  • avatar

    It seemed like they spent an awful lot of money to set up an illegal dealership. Was their plan just to wait and see if they could get away with having a retail store within such-and-such miles of legitimate franchises, or did they really not know the law? If the latter is the case, they should fire their legal team. Or maybe not, if this turns into a case of flipping the store to private dealer for more than they spent for it, which would turn out to be a smart, if bizarre, gambit.

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