As General Motors Corp. files for bankruptcy today, it may have reason to be optimistic if Chrysler LLC’s experience is any indication.
Dealers tell Ward’s Chrysler’s retail sales in May while in bankruptcy, were about 65,000, which exceeds April’s total of just under 61,000.
“That’s no surprise,” says Wes Lutz, owner of Extreme Dodge in Jackson, MI. “Our sales were strong this month.”
Chrysler executives have maintained all month that sales were pacing above what they had projected prior to the auto maker entering bankruptcy on April 30.
Several dealerships say traffic and sales increased significantly the final couple of weeks of May, with some reporting jumps of more than 100%.
Although declining to reveal actual numbers, Marc Cannon, senior vice president-corporate communications for AutoNation Inc., the country’s largest dealer group, says May sales at its Chrysler stores were up significantly.
Tom Vann, owner of Hillsdale Chrysler Dodge Jeep, in Michigan, says May sales were a pleasant surprise.
“We had a slight uptick the first week after Chrysler announced the bankruptcy,” he says. “It was dead the second week, but after that it’s been real strong.”
Vann, whose store is not on Chrysler’s terminated list, is not sure why sales increased, but says customers were playing the “deal of the century routine.”
Tom Libby, president of the Society Automotive Analysts, attributes Chrysler’s sales jump to a sense of urgency on the part of dealers being eliminated.
As of May 28, Chrysler says its terminated dealers have about 16,000 vehicles left to dispose by June 9. “You have 789 dealers that have to get rid of their inventory,” Libby says. “If these dealers don’t sell those vehicles, they’re going to be stuck with them.”
Chrysler says it is helping eliminated dealers find surviving dealers to buy the inventory. It also launched several incentives to help move vehicles off dealer lots.
Vann says he’s encountered several dealers who are opting to sell their inventory to customers, rather than dealers, at severely discounted prices.
He says Chrysler is hoping to have the remaining inventory spoken for by June 4.
In addition to dealer urgency, Libby says bankruptcy fatigue contributed to Chrysler’s sales jump in May and may actually help GM.
“With all of the talk the last couple of months of GM and Chrysler going into bankruptcy, there’s probably not much difference actually being in bankruptcy,” he says.
Libby predicts GM will launch aggressive incentives while in bankruptcy to help prop up car sales.
The bankruptcy judge ruled today sales of Chrysler’s assets to Fiat Auto Group can move forward but he first has to rule this week on objections to the auto maker’s rejection of dealer contracts and objections to the sale by a couple of pension funds. “I’m excited about things at Chrysler getting cleaned up, with specific dates of model rollouts,” Vann says. “We can now plan for the future rather than working day by day answering questions about the bankruptcy.”
