Chrysler, in a motion filed with the U.S. Bankruptcy Court in New York, said many of the dealers' sales are too low.
Two San Diego Chrysler dealerships are among hundreds nationwide facing shut down, according to a bankruptcy court filing.
One of those dealerships said they got the news Thursday morning and have just three weeks to sell off their Jeeps -- so now is a great time to buy.
Chrysler LLC wants to eliminate roughly a quarter of its 3,200 U.S. dealerships by early next month, saying in the bankruptcy filing that the network is antiquated and has too many stores competing with each other.
John Hine Dodge on Camino Del Rio South and North County Jeep on Auto Park Way in Escondido were both on that list.
North County Jeep also sells GMC and Kia and will continue to sell those lines, but says the dealership got the word Thursday morning that they will no longer be selling Jeeps.
General manager Barry Lehmer says he’s not surprised and saw it coming. The dealership has already laid off employees because of the rough economy and says it will not lay off anymore for now.
Lehmer says if you’re looking for a deal on a Jeep, now is the time to buy. The dealership has just three weeks to sell their Jeeps -- so they’re slashing prices.
Chrysler, in a motion filed with the U.S. Bankruptcy Court in New York, said it wants to eliminate 789 dealerships by June 9. Many of the dealers' sales are too low, the automaker said. Just over 50 percent of dealers account for about 90 percent of the company's U.S. sales, the motion said.
Dealers were told Thursday morning via United Parcel Service letter if they would remain or be eliminated.
The move, which the dealers can appeal, is likely to cause devastating effects in cities and towns across the country as thousands of jobs are lost and taxes are not paid.
Chrysler spokeswoman Kathy Graham would not comment other than to say the company will notify dealers before speaking publicly. A hearing is scheduled for June 3 in U.S. Bankruptcy Court in New York to determine whether to approve Chrysler's motion.
Chrysler dealerships aren't the only ones scheduled to get bad news this week. General Motors Corp. says it is notifying 1,100 dealers that it will not renew their franchise agreements when they expire at the end of September of 2010.
In its motion, Chrysler said it has many dealerships that sell one or two of its brands, with Chrysler-Jeep dealerships competing against Dodge dealers as well as other automakers' stores across the country.
"In addition, as suburbs grew and the modern interstate system continued to evolve, longstanding dealerships no longer were in the best or growing locations," the company said in its filing. "Many rural locations also served a diminishing population of potential consumers. Some dealership facilities became outdated. Other locations faced declining traffic count and declining populations."
Chrysler said in its filing that dealers are not competitive enough with foreign brands. Chrysler sold an average of 303 vehicles per dealer in 2008, according to its filing. By contrast, Honda Motor Co. sold about 1,200 vehicles per dealer, while Toyota Motor Corp. sold nearly 1,300 per dealer.
Chrysler said its dealer network "needs to be reduced and reconfigured in a targeted manner to strengthen the network and dealer profitability and to achieve optimal results for the dealers and consumers."
Chrysler has received $4 billion in federal loans and has been operating in bankruptcy protection since April 30. Its sales this year are down 46 percent compared with the first four months of last year and it reported a $16.8 billion net loss for 2008.
One San Diego dealer said the economy is pinching all car dealers from foreign to domestic but said cutting dealerships is the right thing to do.
"It is a bad situation cause nobody likes to see a dealer go out of business but it is a good situation when you're still selling cars and servicing your customers," Scott Gruwell of Courtesy Chevrolet said.
George Belch, a marketing professor at San Diego State University, has been watching the auto industry. He said the cuts were inevitable.
"We've gotten somewhat spoiled. There's really been an excess of dealerships in the automobile industry... They're trying to make sure that the dealerships are strong so there are not problems with dealers continuing to go out of business," Belch said.