Will Chrysler Sell Its California "Retail Laboratory"?

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…