Four area Chrysler dealers lose franchise agreements

Jim Marsh was laughing Thursday morning as he discussed the announcement that Chrysler LLC intended to cancel his Chrysler Jeep dealership's franchise.

Marsh could laugh because he had already added three other new vehicle lines -- Kia, Mitsubishi and Suzuki -- at the dealership.

"That was the luckiest thing I could ever do," Marsh said, after seeing Jim Marsh Chrysler Jeep included on a list of three other local Chrysler dealerships the company wants to end its franchise agreements with by June 9.

"I kind of saw it coming, and we had planned accordingly," Marsh said.

Chrysler said it also intends to cancel franchise agreements with the United Dodge at 5750 Sky Pointe Drive, United Chrysler Jeep at 3250 E. Sahara Ave. and Integrity Chrysler at 6770 Redwood St. Integrity told employees earlier this week that it was closing by the end of the month. Marsh's dealership is at 8555 W. Centennial Parkway.

Chrysler, which filed for bankruptcy last month, notified all dealers Thursday morning saying it wants to shed 789 of its 3,200 U.S. dealerships.

Many of the dealers' sales are too low, the automaker said, with just over 50 percent of dealers accounting for about 90 percent of the company's U.S. sales. The company is also trying to reduce the number of single-brand dealerships to bring all three Chrysler brands, Jeep, Chrysler and Dodge, under a single roof, they said. It also wanted to limit competing dealerships.

A hearing is scheduled for June 3 in U.S. Bankruptcy Court in New York for the judge to determine whether to approve Chrysler's motion. Judges often rely on companies in bankruptcy to help determine what is in their best business interest, such as the closure of dealerships or cancellation of contracts.

Not all of the news from Chrysler was bad for local dealers.

Chrysler also notified three local dealers Thursday, telling them it would not be revoking their franchises: Towbin Dodge of 275 Auto Mall Drive in Henderson, Chapman Dodge at 3175 E. Sahara Ave., and Chapman Chrysler Jeep at 930 Auto Show Drive in Henderson.

"You see (employees) going home that know how to feed their families," said Josh "Chop" Towbin, co-owner and general manager of Towbin Dodge. "It was really a good feeling today."

Chrysler Vice Chairman Jim Press said the list of planned dealership cuts is final and there will be no appeal process. Donald Forman, owner of United Dodge and United Chrysler Jeep, however, said in a statement that the automaker's announcement of dealer terminations comes "in the early stages of Chrysler's restructuring plan" and "dealers can be removed from the list."

Forman predicted his Chrysler dealerships "will remain servicing and selling Dodge, Chrysler and Jeep vehicles to the residents of Southern Nevada for many years to come."

Chrysler executives said the company is trying to preserve its best-performing dealers and eliminate ones with the weakest sales. More than half of the dealerships being eliminated sell less than 100 vehicles per year, they said, and account for 14 percent of U.S. sales.

"We recognize in the short term we will see some loss of sales," Press said. "But based on the long term ... the dealer (network) is key and it's going to be very strong, powerful, with a much better financial viability."

Marsh said Chrysler's plans won't adversely impact his dealership.

He hasn't sold a Chrysler in a month, but Kias are moving, he said. Marsh, who said he will keep all 82 of his employees, also plans to start selling the Mahindra turbo diesel in the fall.

He said he intends to continue selling Chrysler parts and providing service on Chryslers although he may need to subcontract for warranty work.

In addition to the local dealerships, Chrysler put two Cedar City, Utah, dealers on the termination list: Tri State Motors, owned by David Morris, and Parkway Motors, owned by David Nakken. Chrysler also plans to revoke the franchise of Painter's Sun Country Chrysler, owned by James Painter in St. George, Utah.

In an e-mail, retired bankruptcy lawyer Jennifer Kilpatrick criticized Chrysler for seeking harsh prohibitions against terminated dealers.

She said the automaker is asking the judge for an injunction that would prevent the terminated dealers and possibly the lenders who financed the inventory at terminated dealers from selling their remaining Chrysler vehicles.

One document "actually anticipates setting up an expedited procedure for Chrysler to seek punishment of terminated dealers after (the date of the order) if they try to sell off their new-vehicle inventory," she said.

"Overall, especially with respect to existing inventory, Chrysler is treating their terminated dealers brutally, rather than in good faith," she said. "This 'handcuffing' of the terminated dealers in selling their remaining inventories is a super royal screwing of 'loyal dealers,'" she said.

The Treasury Department, which was notified of Chrysler's termination plans Thursday, said "the sacrifices by the dealer community -- alongside those of auto workers, suppliers, creditors and other Chrysler stakeholders -- are necessary for this company and the industry to succeed."

The 3.5 million customers who purchased vehicles from the affected dealers will be notified about the closures and their warranties will still be honored, said Chrysler Vice President Steven Landry.

Chrysler dealerships aren't the only ones scheduled to get bad news this week. General Motors Corp. says it will notify 1,100 dealers today that it will not renew their franchise agreements when they expire at the end of September of 2010.

"We understand there's going to be a consolidation of dealers, said John McEleney, a Clinton, Iowa, auto dealer who serves as chairman of the National Automobile Dealers Association. "We just think the process needs to be slowed down."

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.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420. The Associated Press contributed to this report.