Auto-makers To Cut Off Dealerships

The U.S. financial crisis facing auto-makers has begun to take its toll on the dealers as well. Following the declaration of bankruptcy by both Chrysler and General Motors, two of the U.S.’s largest auto-manufacturers, the companies put forward a plan to restructure their dealership networks. Chrysler will terminate the contracts for 789 dealerships while General Motors plans on terminating over 1,100.

“This has been the most difficult business decision I’ve ever personally had to take, but the decisions had to be made. They were gut-wrenching, but absolutely necessary for Chrysler’s survival,” said James Press, Chrysler President, during a hearing with the Senate Committee on Commerce, Science, and Transportation today.

Dealers have cited a number of concerns over the restructuring. Many dealers were not told why their contracts will be cancelled as opposed to others and questions remain over the reasoning behind shutting down the franchises when the dealers cover all expenses.

Perhaps most distressing for the dealerships is the timeframe in which they have to close-shop. While General Motor’s is giving their franchises till October 2010 to gradually sell their inventory, Chrysler has ordered its dealerships to perform the same task within twenty-six days.

“You just can’t close a dealership in 3 weeks,” said Russell Whatley, a Chrysler dealer who appeared as a witness before the committee. “We have an 8 month supply of vehicles and only three weeks to clear them out.”