How Will Chrysler Determine Which Dealers to Cut?

The two questions Chrysler dealers are asking, Am I on the list (the list of which dealers to eliminate) and What is the criteria for determining which dealers are on that list?

The problem is that Chrysler executives nor members of the automotive task force are talking, leaving just about everybody in the dark.

There are a couple of numbers being mentioned as to how many dealers are on the list. One is 800, based on some fuzzy math from court documents Chrysler filed yesterday.

Another number is much higher -- in the 1,500 range. Chrysler President and Vice Chairman Jim Press told dealers last week there was no set number yet, but it would not be "catastrophic."

Sources tell Ward's that Chrysler put together as list as early as a month ago at the request of the Treasury Dept. and that the task force actually went through the list several days ago.

I'm speculating here, but I imagine Chrysler's eight business centers helped put the list together. I can see it now. A business center manager with the zone managers sitting at a table going through list of their dealers determining which ones to eliminate.

You pushed back on taking extra inventory? you're out. You swore at the zone manager in a meeting or on the phone? You're out. You failed to upgrade your facilities? You're out.

It probably was a tad more scientific than that, but until Chrysler steps up and says what the criteria is, then dealers should assume the worst.

The point is, Chrysler dealers have no protection now. Because of the bankruptcy, the state franchise laws provide no cover. Chrysler will use the bankruptcy to allow it to determine which dealers to pay incentive and warranty money to.

Also, the list of "bad" dealers probably already has been given to GMAC Financial, which will use that list to help determine which dealers it will provide floorplan financing to. So there is no protection from the financing sources.

Chrysler's (Fiat's) strategy appears to be separating the good assets from the "bad" assets. The good assets will be incorporated into the new Chrysler, while the bad are placed in a "new" holding company, given some money while being left to fend for itself, liquidating assets while defending lawsuits in court for the next 10 years. The problem, the unwanted dealers likely will be part of the "bad" Chrysler.