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Chrysler, GM Dealers Face Imminent Closure

May 14, 2009

AUBURN HILLS, Mich. and DETROIT — Documents filed with the U.S. Bankruptcy Court in Manhattan today show that Chrysler LLC plans to cut ties with 789 of its approximately 3,200 U.S. dealerships by June 9, pending approval by the court. Fellow Big Three automaker General Motors will begin sending individual status reports to its network of 6,200 dealers Friday, possibly beginning the process of terminating franchise agreements with as many as 1,200 before June 1.

The cuts in dealer ranks are part of a long-term plan to return both companies to viability. Chrysler filed for bankruptcy on April 30 and announced an agreement with Fiat SpA that will give the Italian automaker a 20 percent stake in Chrysler when it emerges from bankruptcy protection. GM is reducing its roster of dealers, among other moves, to try to stay out of bankruptcy court.

"We are in the process of revitalizing Chrysler's business to succeed as a viable enterprise under new ownership in the future," said Jim Press, the OEM's vice chairman and president. "The unprecedented decline in the industry has had a significant impact on our sales and forced us to reduce production levels to better match the needs of the market."

On Wednesday, National Automobile Dealers Association Chairman and Iowa dealer John McEleney warned that trimming dealers was unlikely to save the automakers.

"We're not arguing against dealer consolidation," McEleney said. "Our concern is with the accelerated timeframe. Keep in mind that dealers are not a cost center for their manufacturers. Dealers are an automaker's main source of revenue."

McEleney, other NADA leaders and dozens of dealers were set to meet with Washington lawmakers yesterday and today to share their concerns.

"A rapid cut of dealers is a bad idea," McEleney said. "This would have adverse effects on the auto industry and hurt an already struggling U.S. economy."

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