- The Washington Times - Monday, June 22, 2009

Chrysler’s dealer closings and planned cuts by General Motors will cause domestic automakers to lose sales to foreign rivals, affected dealers say.

After the closings there will be 80 fewer domestic dealers than import dealers in Maryland, according to figures by R.L. Polk & Co. provided by Jack Fitzgerald, co-chairman of the newly formed Committee to Restore Dealer Rights.

There will be 45 foreign-car sale-and-service outlets on the Rockville Pike corridor from the D.C. line to Gaithersburg, compared with seven domestic counterparts, he said.

“It’s like surrender. Are they waving the white flag?” said Mr. Fitzgerald, 73.

In Virginia, domestic retailers will maintain a slight edge over import dealers, but nothing like the big lead they used to have.

Mr. Fitzgerald owns 11area dealerships, and will have lost three Chrysler and two GM franchises when the cutbacks are finished.

Before Chrysler’s dealer terminations there were eight states where import dealers outnumbered domestic dealers. When GM completes its franchise reductions, import dealers will have the lead in 16 states, according to R.L. Polk data.

The carmakers dispute that sales will be hurt, however, and many industry analysts agree that dealer reductions are necessary.

Chrysler spokeswoman Kathy Graham said the average customer still will need to drive fewer than 11 miles to find a dealer in rural areas, and 5 miles in metropolitan areas.

The automakers are broadening their arguments for making the cuts, perhaps in response to growing political pressure on Capitol Hill.

Mr. Fitzgerald was instrumental in drafting, and finding House sponsors for, legislation to reverse the franchise closings.

The House bill quickly gained 175 bipartisan co-sponsors, Mr. Fitzgerald said, and Sen. Charles E. Grassley, Iowa Republican, introduced a Senate version last week.

GM Chief Executive Officer Frederick “Fritz” A. Henderson, facing a skeptical House panel 10 days ago, said the 1,350 dealer closings planned by the end of next year will save the company $2 billion, or $1,000 per car, a figure not widely publicized before.

Chrysler Deputy CEO Jim Press told the same House Energy and Commerce Committee oversight panel that the company could save $1.5 billion - the cost of vehicles not sold by dealers who fail to meet minimum sales goals.

Mr. Fitzgerald has said that he and many other dealers are not underperformers.

“The guy [Mr. Press] will say anything, I believe he will say anything,” Mr. Fitzgerald said, noting that a few months ago Mr. Press was urging dealers to buy more inventory.

The reason their franchises have been rejected is that they don’t sell Chryslers, Dodges and Jeeps under the same roof, he said, and many also sell competitors’ cars.

Ms. Graham said last week that Chrysler can save more than $1.4 billion in product engineering, development and administrative costs by terminating the franchises.

Those cost figures have not been widely disseminated because Chrysler was reluctant to reveal competitive information, she said.

Her comments strongly suggested that when Chrysler reveals its product plans in late summer it will pare its lineup by eliminating vehicles based on the same platform, such as the Chrysler Sebring and the Dodge Avenger. Six Chrysler and Jeep models have Dodge counterparts, she said.

Consolidating dealers allows the automakers to reduce the number of models they make, because stand-alone dealerships need to be supplied with a full suite of products.

“Do you think the Dodge guys will be happy with one pickup?” asked Mr. Fitzgerald, noting that Fiat has divided Chrysler’s auto units into three separate divisions. “It doesn’t cost anything more to have different brands, and they give you different bites of the market, appeal to different demographics.”

Mr. Fitzgerald said that Chrysler discouraged dealer consolidation until recently, but Ms. Graham said the company’s “consistent message” for 10 years has been to get all three brands under one roof.

Jesse Toprak, a senior analyst at Edmunds.com, said the model reductions would not be surprising, as that has been an industry trend for years.

“You will see the sister brands start to disappear,” he said, explaining that Chrysler may focus on cars, including subcompacts based on the Fiat 500, while Dodge may stick to trucks.

Previously, the automakers had focused on the need for a smaller, more profitable dealer network that does not compete with itself, an argument that analysts say holds more water than the claim that dealerships increase their cost of doing business.

“Longer term, that’s an advantage, but I don’t think there’s a huge cost savings by having fewer dealers,” said George Magliano, an auto analyst with IHS Global Insight.

The companies are downsizing their dealer ranks to reflect reduced market share, Mr. Magliano said, noting the nation’s dealer network was established when Detroit automakers had 70 percent of the market.

More profitable dealers will allow for more investment in facilities and better customer service, he and Mr. Toprak said.

“You build up those dealers that remain in the market,” Mr. Magliano said. “There’s been an issue with the quality of the dealer base. They have to weed out those that don’t support their customers. [Dealers] have a reputation, and it’s not a good one.”

Mr. Fitzgerald called the claim that a smaller dealer base will boost customer satisfaction a “theory,” and pointed out that domestic dealerships scored well versus imports in J.D. Power and Associates’ 2009 survey.

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