What will Chrysler do with the remaining 2367 dealerships?

Chrysler announced that it will be pulling the contracts of a quarter of its dealerships. The worst-performing 789 dealerships will no longer be authorized Chrysler-Dodge-Jeeps retailers and service centers.

The talking heads are all over this issue. Some say that it is a bad move that will cost jobs, others say it will help save the company. Another group are focusing on the recent news that Chrysler executives are using loopholes to increase their salaries when they should be finding ways of keeping dealerships open.

Here’s my take: it’s about time Chrysler downsized its dealer network. If you’re like me, the first thing that came to your mind when you read the press release was “CHRYSLER HAS 3156 DEALERSHIPS!?!?!” Remember, folks, Chrysler, Dodge and Jeep only sold 1,453,122 units in 2008, which means the average was 460 car sales per dealership total – or each dealer selling 1.26 new vehicles per day. In actuality, Chrysler noted over 90-percent of sales were made by the top half of dealerships.

But the problem is deeper than it seems. The Big Three have a habit of selling dealership franchise contracts to anyone with money. They don’t give a crap about internal competition, nor do they care about quality of service at dealerships. At best, the Big Three have made a half-assed approach to quality-control, usually in the form of sending surveys to customers. If you’re like me and have circled “not satisfied” on one of these, you’ll know that the only thing that will happen is you’ll be treated even worse when you bring your vehicle in for service. (I actually had a Chevrolet dealership service manager in Shelton, WA yell at me for indicating on a surbey that I was “not satisfied” that my three-month-old Corvette had been in his shop for six weeks as they fumbled trying to repaint the car’s rear panel that had come botched from the factory!)

Having too many dealerships means that there aren’t nearly enough top-quality sales and service personnel to go around. Furthermore, it’s harder – and more importantly MORE EXPENSIVE to maintain effective sales and service training programs. Therefore, domestic dealerships have been the cesspool for auto-related incompetence.

My least fond memory of dealing with Chrysler dealerships was when my 1991 Le Baron convertible would sporadically buck and shutter. With the car still under its factory warranty, I made over a dozen trips to three Chrysler dealerships in the Seattle area to address the problem over a six month time frame. Two dealerships indicated that although they could duplicate the problem, they had spent so much time on it and thrown so many new parts at it that they’d have to start charging me for any future parts or service – even though the problem was occurring with more frequency! (I wound up calling a mechanic my family had used back in the 1970s, and the mechanic was able to diagnose AND FIX the problem within TEN MINUTES – a loose wire in the wiring harness for the ignition and fuel systems.)

It’s not just a problem with Chrysler. Last year when I had dinner with Bob Lutz from GM, I asked him his plan to train service centers to handle the complex Chevy Volt, especially when it was already common knowledge that most dealerships weren’t qualified to effectively maintain Corvettes (and then I cited my personal experience taking my new Corvette in fourteen times in two years to fix seven problems – four of which were caused by dealers trying to fix the other problems). Lutz’s comeback was “you know, dealerships are independent, so we don’t have much say with what they do. I suppose most of the Volt won’t be serviced at dealerships…the parts will just be replaced there.”

As for the sales side, not only are Chrysler dealerships (as well as GM and Ford stores) saddled with plenty of inferior products, but also these shops must compete with somewhere around 50 other dealerships with the same cars in their own state – not to mention all those with competing products. And since there’s little to no training for sales people, it’s every man and woman for themselves.

If you don’t believe there’s a difference, go walk into two different BMW or Lexus dealerships. Notice how the showroom looks, how the sales staff approaches the interaction, and the types of information provided. In contrast, go to two Chrysler, Ford or GM dealers…make them Lincoln or Caddy dealers if you prefer a more apples-to-apples comparison. The lack of structure and education is apparent in the Big Three.

With real market pricing available a click away on the web, there’s no need for ten dealers of one brand to be competing within the same metropolitan area. Chrysler is right to lower costs by cutting the dealership fat. GM and Ford should follow. Then they all need to get more from less by actually investing in some BMW-style education for sales and service.

It’s time for the Big Three…and maybe the US government (which outlawed direct sales to customers) to rethink the relationship between dealers and manufacturers.

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2 Responses to What will Chrysler do with the remaining 2367 dealerships?

  1. Ries says:

    If my area is any guide, they are actually closing far too few dealers, not too many.
    In Burlington/Mt. Vernon, they are closing the Jeep dealer- which is right next door to a separately owned Dodge/Chrysler dealer. Kind of a no brainer, if you ask me.
    After they shut down these dealers, they will still have something like 500 more dealers than Toyota does, while Toyota sells around twice as many cars.

    Chrysler will still have dealers in Bellingham, Oak Harbor, Burlington, Arlington, and Everett- given the volume of sales, and the population, probably about 3 too many.

  2. David Zarkom says:

    Very well written analysis of Chrysler dealership situation. It was a non-story in the Twin Cities with only two metro dealers closing and they were in poor locations off the freeways. Previously, Denny Hecker had his Chrysler dealerships confiscated and closed by Chrysler Financial for failure to pay his loans. The reputable dealers, like Larry Reid, will survive and thrive. GM is closing a Buick dealer, Walser, that moved the dealershlp from a modern new building to someplace smaller and also caused complaints from adjoining condos. All told, it’s a positive development. I first bought a new Plymouth from Hessing Thurber in Boise in 1967 and 40 years later I bought a year-old Sebring from Larry Reid in Bloomington. The Sebring is worry free while the Plymouth Satellite was a series of problems. Life is strange. Dave

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