Mass. Chrysler dealers challenge closings

Chrysler LLC and General Motors Corp., both struggling to survive, last week said they have too many dealerships to be profitable and want to close underperforming locations to become more competitive. Chrysler, which has filed for bankruptcy, plans to eliminate nearly 800 dealers nationwide next month, including a dozen in Massachusetts. GM, meanwhile, has said that it wants to cut about 2,400 of its 6,000 dealers by the end of 2010.

Some dealers, however, are fighting back, challenging performance ratings and sales numbers that the automaker executives said were used to determine which franchises should be closed.

"This is our whole life here," said Jim Bickford, whose family owns Westminster Dodge in Dorchester, one of the dealers listed in the bankruptcy court filing made on behalf of 284 Chrysler dealers yesterday by the New York law firm Squire, Sanders & Dempsey LLP. "Do I think we have a chance? It's a very small chance. If there's a possibility, I'm going for it. I can't just fold up."

The law firm did not return calls for comment yesterday, but court documents show that dealers believe Chrysler is proceeding with the closings too quickly.

Chrysler spokeswoman Kathy Graham said the company's bankruptcy status makes it possible for dealers to voice their concerns.

"There is a process there for dealers to be heard by the judge," Graham said. "So we're just kind of waiting for that process to go through the court at this time."

Though he questioned the depth of the cuts being made by Chrysler and GM, auto analyst John Wolkonowicz, of IHS Global Insight in Lexington, said economics makes it necessary for US automakers to become smaller.

"They're dealered for a higher market share than they're ever going to see again," Wolkonowicz said. "When you have too many dealers, none of them are profitable."

But dealers questioned whether their elimination would really help automakers, who rely on them to sell their products.

"They have to prove that the closure of 789 dealers is somehow going to put money back in the pockets of creditors," said John Sullivan, of Sullivan Brothers Chrysler-Dodge in Kingston. His dealership is also one of those being represented by Squire, Sanders & Dempsey LLP. Sullivan said he believes Chrysler is trying to "get this pushed through as fast as possible without any counter argument."

According to those familiar with the auto industry, franchised dealerships are not a direct strain on automakers' finances. Once a vehicle is delivered to a dealership, the dealer is responsible for any costs incurred to maintain the vehicle and for setting up a financing arrangement with a local bank. The automaker might offer dealers training and incentives to sell more cars - expenses that a GM spokesman called a "good chunk" of money - but such efforts are usually offset by improved sales, according to Wolkonowicz.

Bickford said he doubts that his business's performance had anything to do with it appearing on Chrysler's list of dealerships it wants to close. He speculated that the operation is too small and that Chrysler sees an opportunity to rid itself of franchises that only sell one brand.

"It's their chance to put three brands under one roof - stealing family-owned businesses and giving them to these mega dealers," Bickford said.

Erin Ailworth can be reached at eailworth@globe.com.