(AP) — A Chrysler dealer says the automaker will tell at least 800 of its 3,200 dealers Thursday they have been fired.
The dealer listened to a conference call Tuesday held by lawyers who want to represent the dealers whose franchise agreements will be rejected.
The dealer did not want to be identified because the call was confidential.
But he says a lawyer from the firm Squire Sanders, of Cincinnati, told dealers Chrysler will ask a bankruptcy judge to reject the franchises.
Chrysler LLC hasn’t said how many franchises it seeks to slash nor revealed the criteria for deciding who goes.
The automaker, which has received $4 billion in government loans, has filed for Chapter 11 bankruptcy protection in New York. It will the court to help it dispose of unwanted dealers, although dealers may fight back.
Cutting dealer ranks could affect customers eventually if it means a dealer they’ve bought from in the past no longer sells Chryslers.
And in the days after the filing, people are watching closely to see if consumers still are willing to buy cars from an automaker that’s in bankruptcy court. The industry has warned that carmakers can’t go into Chapter 11 like other companies because people won’t buy a car from a bankrupt automaker.
But there’s evidence at dealerships throughout the country that people still are willing to shop for Chrysler vehicles. Some are bargain hunters. Some are there out of a sense of duty, trying to do something good for their country. And others may just want a Chrysler, Dodge or Jeep and are ready to buy.
Still, dealers are nervous. They worry whether they’ll be around in a few months. They worry that production shutdowns — Chrysler has closed its plants for at least a month — will leave them without anything to sell in a couple of months. And they worry, mostly, about the uncertainty of what’s to come.
Like any good salesman, though, dealers are trying to put an optimistic spin on the situation.
“America loves an underdog,” said Alan Wilson, president of Howard Wilson Chrysler-Jeep-Suzuki in the Jackson, Miss., metro area. “America has always rallied to people when they are down on their luck.”
Chrysler dealers got an initial bump in interest after its bankruptcy filing, said consumer Web site Edmunds.com. Web searches for Chrysler products jumped 15 percent, according to the site.
“Maybe the Chrysler bankruptcy announcement attracted the bargain shoppers who may think a bankruptcy is the same as liquidation with price-busting clearance sales,” said Michelle Krebs, editor of Edmunds.com’s AutoObserver.
Dealers back that up. They say customers are coming into the showroom and making outrageously low offers, expecting dealers to take any price just to sell a car. Chryslers already were selling for an average of 18.1 percent below sticker price before the bankruptcy filing, according to Edmunds.com’s most recent data. The industry average discount is 15.6 percent.
Some people are overly optimistic about markdowns. Gary Burnett, sales manager at Bill Luke Chrysler, Jeep & Dodge in Phoenix, says one buyer wanted a 75 percent discount.
“That’s a $25,000 car right there,” Burnett said, pointing to a shiny 2009 Dodge Journey. “A guy came in and offered me $6,000 for it, including tax and license. He said, “Well, you guys are going bankrupt anyway.'”
What does bankruptcy mean?
Not everyone knows what it means for Chrysler to be in Chapter 11, which leaves some people believing cars will be sold off in a fire sale because the automaker is going out of business.
The truth is, there’s a chance Chrysler could face liquidation. That would mean the Chrysler as we know it — the U.S.-based carmaker that produces Chrysler, Jeep and Dodge brand cars and trucks — would be sold off for its parts, possibly splitting the brands and selling off the factories and machinery.
But we’re not at that point. Far from it. The automaker is in court attempting to restructure its debt, something that doesn’t affect the average consumer. It’s closed its plants temporarily, but dealers are selling cars and the company is operating.
Still, all the unknowns are leaving dealers fielding questions they don’t quite know the answers to.
“Do you know if you’re getting the new Challenger SE model V-6 with the five-speed automatic this spring?” Henry Pilichowski, of Wilmington, Del., asked Bob Weiss, sales manager at Carman Chrysler Jeep Dodge in New Castle, Del., last week while waiting for his 2005 Dodge Magnum station wagon to be serviced.
“I don’t know, buddy. Everything’s up in the air,” Weiss said. “Crazy time.”
Jackson dealer Wilson says he’s worried about having enough cars and trucks on his lot later this summer. Last year, he scaled back inventory because sales were starting to fall. With Chrysler’s plants closed, he’s in serious danger of running out.
Wilson said he has about two to three months’ worth of inventory on his lot. “If my factories are down for two months and it takes six weeks to get a car shipped, do the math: I’ll be out of cars by August.”
And will the dealership even be here in six months? That’s something that nags at dealers even as they try to paint an optimistic picture.
Larry Giacchino, owner of Carman Chrysler Jeep Dodge, says it takes him about 30 seconds to fall asleep at night because he’s not worried at all about the business. Later, though, he acknowledges he fears he may get bad news in the mail soon, when Chrysler notifies dealers who it plans to close.
Giacchino thinks he’s well-positioned to survive with a clean, new building on a local highway and a full range of Chrysler vehicles. “I’m knocking on wood.”
In Phoenix, Kim Carter, general manager at Bill Luke Chrysler, Jeep & Dodge, says he realizes some dealerships need to be closed. “I hope ours isn’t one of them. But there are too many dealers … too much inventory.”
Despite worries and confusion, dealers have found one of their most important roles has become being cheerleaders for their staffs through the tough time and talking up the future.
After enduring a tough sales weekend following Chrysler’s bankruptcy filing, Jackson dealer Wilson told his sales staff to take their spouses out to dinner on him. “They worked hard, and it has been an emotional and mentally stressful time. We have to sell cars.”
Wilson had a meeting with employees the day after the filing to pass on all the information he had about the car company’s future, prospects for new inventory and how the dealership planned to carry on.
“I told them, “The thing is, guys, we have to sell cars.’ We’ve got 60 employees here who have to take a paycheck home. What they do in Washington, D.C., or Detroit, Mich., I can’t control.”
