Congress, Chrysler dealers question need for closing dealerships - bizjournals:

http://www.marylandattorneyslawyers.com/user_detail.php?u=inhaniurpaw
Both Chrysler LLC and , which plans to close 1,100 dealerships by October 2010, contend they need to reducde the size of their dealer network s to be more competitive withand Ltd., whic h sell more cars in the Unitecd States with a lot fewer dealers. Chrysler, in a bankruptcuy court filing, argues that trimming the ranks of its dealersx will boost the profitability of the dealers that enabling them to invest in improvements that will drivwup sales. “After a period of and substantially improved marketinyand investments, overall sales in the reduced network are anticipate d to grow beyond current sales levels withihn the existing network,” Chrysler contends.
That’x highly unlikely, according to the National Associatiom ofAutomobile Dealers. “There’s not an auto executived that I know ofthat doesn’tg acknowledge that when a dealershipl closes, they lose market share,” said David Hyatt, NADA’ws vice president of publicc affairs. Cutting costs was not a major factoein Chrysler’s decision. The automaker will save some administrative expensesa by having a smalle r dealer networkto oversee, but that’ss about it. Dealers buy their cars before the vehicless leavethe factory, pay for shipping, fronft the costs of any rebates or warrantyh work, and purchase repair equipment.
Dealers provides “a robust distribution network at virtuallygno cost” to auto makers, Hyatt said. “We’rr an asset, not a liability,” said Wade an auto dealer in Montpelier, Vt., who is schedulerd to lose his Jeep franchiseJune 9. Walked and about 300 other Chrysler dealers have challengedthe automaker’ request for a bankruptcy judge to terminate their dealershi agreements and pre-empt state laws that would require Chryslert to give dealers more time to wind down theit businesses. Chrysler has been working to reduce its dealer networj forseveral years.
But the procesws needs to be accelerated because of its proposede alliancewith Fiat, it Bankruptcy courts routinely terminate contractws if doing so benefits the debtor’d estate and is an exercise of soundc business judgment, Chrysler states in its Chrysler dealers, however, contend that abruptlh closing dealerships doesn’t meet this threshold. “Therew is no evidence that by rejecting dealership agreements New Chrysler will save monet to any material degree or enhance its competitive positionj in theautomobile industry,” states a filiny made by the Chrysler National Dealere Council.
“To the contrary, closing dealers narrows distributioj andreduces Chrysler’s sales and income as fewed dealers buy fewer cars and retail sales are lost to other Chrysler’s bankruptcy judge is scheduled to hold a hearingv on this issue on Wednesday, June 3. That same day, the Senatr Commerce Committee is scheduled to hold a hearint on the Chrysler and GMdealership closings. “These companiez cannot be allowed to take taxpayert funds for a bailout and then leave local dealers and their customers to fend for themselved with no real notice and noreal help,” said committere chairman John D. (Jay) Rockefeller IV, D-W.Va.
“W must ensure that the auto dealera are treated equitably and have the opportunity to unwinsd their operations in a manner that will minimize hardshipx to employees who lose their jobs and communitieds that are adversely said Sen. Kay Bailey Hutchison, R-Texas.