Troubled automaker tells court it wants to shutter about a quarter of its dealers.
NEW YORK (CNNMoney.com) -- Chrysler LLC will close down 789 dealerships, or roughly 25% of the current number, according to a plan filed in bankruptcy court Thursday.
Chrysler had a total of 3,181 authorized dealers in operation at the time of its April 30 bankruptcy court filing, according to court filings. Just over half of that number accounted for more than 90% of Chrysler sales, according to the filing.
Auburn Hills, Mich.-based Chrysler does not believe closing these dealerships will adversely affect sales.
"After a period of time, and substantially improved marketing and investments, overall sales in the reduced network are anticipated to grow beyond current sales levels within the existing network," the carmaker said in its filing.
Chrysler's plans to close the dealerships must still be approved by U.S. Bankruptcy Court Judge Arthur Gonzalez, who is overseeing the government-led restructuring of the company.
The Obama administration, which has pumped more than $7.2 billion into the tottering automaker, has said it hopes the move Chrysler through bankruptcy quickly by creating a shell company that will be owned by a combination of the government, the United Auto Workers union and Italian carmaker Fiat.
In assessing Chrysler's viability, the Treasury Department found the automaker could not survive as a stand-alone company. Chrysler had already been in discussions with Fiat about a partnership. The current plan calls for Fiat to assist Chrysler by providing engineering for small and midsized cars.
General Motors (GM, Fortune 500) has said it wants to cut 42% of its dealership base to 3,600 by next year. Fritz Henderson, the GM chief executive, said on Monday that it would soon start notifying dealers as soon as this week.
For the automakers, closing dealerships is a tricky business. For one, Chrysler and GM won't save substantial amounts of money by closing dealerships, which are independently owned businesses.
At the same time, both GM and Chrysler have no choice but to greatly reduce their dealerships ranks, which have grown far larger than sales demand requires. The goal is a leaner, more profitable, network of sellers.
In ordinary circumstances, automakers' efforts to close dealerships have been stymied by state laws that protect franchisees. Bankruptcy court judges, however, can override such laws.
Chrysler had a total of 3,181 authorized dealers in operation at the time of its April 30 bankruptcy court filing, according to court filings. Just over half of that number accounted for more than 90% of Chrysler sales, according to the filing.
Auburn Hills, Mich.-based Chrysler does not believe closing these dealerships will adversely affect sales.
"After a period of time, and substantially improved marketing and investments, overall sales in the reduced network are anticipated to grow beyond current sales levels within the existing network," the carmaker said in its filing.
Chrysler's plans to close the dealerships must still be approved by U.S. Bankruptcy Court Judge Arthur Gonzalez, who is overseeing the government-led restructuring of the company.
The Obama administration, which has pumped more than $7.2 billion into the tottering automaker, has said it hopes the move Chrysler through bankruptcy quickly by creating a shell company that will be owned by a combination of the government, the United Auto Workers union and Italian carmaker Fiat.
In assessing Chrysler's viability, the Treasury Department found the automaker could not survive as a stand-alone company. Chrysler had already been in discussions with Fiat about a partnership. The current plan calls for Fiat to assist Chrysler by providing engineering for small and midsized cars.
General Motors (GM, Fortune 500) has said it wants to cut 42% of its dealership base to 3,600 by next year. Fritz Henderson, the GM chief executive, said on Monday that it would soon start notifying dealers as soon as this week.
For the automakers, closing dealerships is a tricky business. For one, Chrysler and GM won't save substantial amounts of money by closing dealerships, which are independently owned businesses.
At the same time, both GM and Chrysler have no choice but to greatly reduce their dealerships ranks, which have grown far larger than sales demand requires. The goal is a leaner, more profitable, network of sellers.
In ordinary circumstances, automakers' efforts to close dealerships have been stymied by state laws that protect franchisees. Bankruptcy court judges, however, can override such laws.
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