Anyone work for a Dealer? Why does Chrysler want to shut down dealers? - DodgeIntrepid.Net Forums - Dodge Intrepid, Concorde, 300m and Eagle Vision chat
 
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post #1 of 15 (permalink) Old 05-15-2009, 01:39 AM Thread Starter
 
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Anyone work for a Dealer? Why does Chrysler want to shut down dealers?

So far I have not found a good answer. How is Chrysler plan to save money here? My understanding is that dealers are franchises. I found this story online:

Larry Davis, general manager of Morong Brunswick, a small Volkswagen and Jeep dealership in Maine, could hardly contain his exasperation with the news.
The dealership, which dates to 1982, has sold, serviced and warranteed hundreds of Jeeps. Now he's left wondering how much assistance he'll get from Chrysler with his remaining 12 new Jeeps, as well as his parts inventory and specialized equipment.
"We don't cost them anything. When they ship a car, I write them a check. I don't cost them anything. And they want to shut me down?" he asked
.


Locally here in Chicago Balzekas Chrysler which has been in the city since 1933 (Obama had his cars serviced here) is closing. The place has history. It was a small dealer but it held it's head up. I have to do some more research, but does anyone have any insight to this?
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post #2 of 15 (permalink) Old 05-15-2009, 02:49 PM
 
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Never having been near the business, I don't have an answer. But my understanding is that dealerships are individually owned, and like your Jeep dealer said, there should be no cost to Chrysler if they choose to keep selling their cars. Seems like it would be to Chrysler's advantage to keep as many sales outlets open as possible.
But GM is also closing 1,000 dealerships, so there must be some way it costs the parent company to keep them open, even if we don't know how it works.
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post #3 of 15 (permalink) Old 05-15-2009, 04:49 PM
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They are probably closing the ones that brings the company in the least amount of money...
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post #4 of 15 (permalink) Old 05-15-2009, 05:02 PM
 
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They must have other criteria. They are closing 3 or 4 large dealerships in the Kansas City market. Maybe they're closing the ones that don't cheat the customer on warranty claims. That would cost money for Chrysler to honor the warranties.
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post #5 of 15 (permalink) Old 05-15-2009, 05:34 PM
 
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Here is what I've learned; Let's say dealership "x" sold 5,000 PT Cruisers last year. The amount of cars the factory builds is based on the dealer's sales from the previous year, as well as future projections which is anyone's best guess at best. So the factory has to build so many cars it thinks is going to sell. It has to do this all in the first 6-7 months of the year because next year's new models are going to be coming on line during the latter part of the year. If the factory builds a million pt cruisers for all the dealerships in the country and is left with 200,000 of them at year end, they LOSE money. They lose money because none of their dealers are ordering any more cars. So not only did the factory lose their profit margin they also must pay tax on any and all remaining inventory in their possession. They must also start slashing prices and offering rediculous rebates in order to move the old inventory. This is just one example of one vehicle. Now multiply that by your entire line and you start to see the bigger picture.
By closing dealerships and cutting out a significant part of the guesswork as to how many vehicles to build, Chrysler is attempting to make money by producing only what they can sell. I know it doesn't sound right but they can actually turn a profit by making less cars. You will see in the near future a waiting period for a new vehicle like it was in the old days. They intend to build only what they can sell immediately, nothing more. The days of searching through car lots at 100's of cars only to find none are exactly what you are looking for are numbered.
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post #6 of 15 (permalink) Old 05-15-2009, 05:48 PM
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Quote:
Originally Posted by juswakin View Post
Here is what I've learned; Let's say dealership "x" sold 5,000 PT Cruisers last year. The amount of cars the factory builds is based on the dealer's sales from the previous year, as well as future projections which is anyone's best guess at best. So the factory has to build so many cars it thinks is going to sell. It has to do this all in the first 6-7 months of the year because next year's new models are going to be coming on line during the latter part of the year. If the factory builds a million pt cruisers for all the dealerships in the country and is left with 200,000 of them at year end, they LOSE money. They lose money because none of their dealers are ordering any more cars. So not only did the factory lose their profit margin they also must pay tax on any and all remaining inventory in their possession. They must also start slashing prices and offering rediculous rebates in order to move the old inventory. This is just one example of one vehicle. Now multiply that by your entire line and you start to see the bigger picture.
By closing dealerships and cutting out a significant part of the guesswork as to how many vehicles to build, Chrysler is attempting to make money by producing only what they can sell. I know it doesn't sound right but they can actually turn a profit by making less cars. You will see in the near future a waiting period for a new vehicle like it was in the old days. They intend to build only what they can sell immediately, nothing more. The days of searching through car lots at 100's of cars only to find none are exactly what you are looking for are numbered.
After reading a few things online this is what I have come up with. Less dealerships, less cars they have to make. Less cars means more money for Chrysler (less parts having to be made, less people to make those cars, less cars they have to pay taxes on. Also everyone will want new cars so they will actually sell all their new cars at their prices instead of not selling them and marking them down. Less cars = higher demand = higher prices.)
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post #7 of 15 (permalink) Old 05-15-2009, 09:55 PM
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Quote:
Originally Posted by juswakin View Post
Chrysler is attempting to make money by producing only what they can sell. I know it doesn't sound right but they can actually turn a profit by making less cars. You will see in the near future a waiting period for a new vehicle like it was in the old days. They intend to build only what they can sell immediately, nothing more. The days of searching through car lots at 100's of cars only to find none are exactly what you are looking for are numbered.

I ordered my Intrepid built the way I wanted it. It was delivered 4 weeks after I placed the order.
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post #8 of 15 (permalink) Old 05-15-2009, 10:53 PM
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Quote:
Originally Posted by juswakin View Post
Here is what I've learned; Let's say dealership "x" sold 5,000 PT Cruisers last year. The amount of cars the factory builds is based on the dealer's sales from the previous year, as well as future projections which is anyone's best guess at best. So the factory has to build so many cars it thinks is going to sell. It has to do this all in the first 6-7 months of the year because next year's new models are going to be coming on line during the latter part of the year. If the factory builds a million pt cruisers for all the dealerships in the country and is left with 200,000 of them at year end, they LOSE money. They lose money because none of their dealers are ordering any more cars. So not only did the factory lose their profit margin they also must pay tax on any and all remaining inventory in their possession. They must also start slashing prices and offering rediculous rebates in order to move the old inventory. This is just one example of one vehicle. Now multiply that by your entire line and you start to see the bigger picture.
By closing dealerships and cutting out a significant part of the guesswork as to how many vehicles to build, Chrysler is attempting to make money by producing only what they can sell. I know it doesn't sound right but they can actually turn a profit by making less cars. You will see in the near future a waiting period for a new vehicle like it was in the old days. They intend to build only what they can sell immediately, nothing more. The days of searching through car lots at 100's of cars only to find none are exactly what you are looking for are numbered.
Production is based on what dealerships orders, customer orders, and also what the corporation orders. They do not go by previous years sales numbers.

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Originally Posted by NHogan View Post
After reading a few things online this is what I have come up with. Less dealerships, less cars they have to make. Less cars means more money for Chrysler (less parts having to be made, less people to make those cars, less cars they have to pay taxes on. Also everyone will want new cars so they will actually sell all their new cars at their prices instead of not selling them and marking them down. Less cars = higher demand = higher prices.)
Inventory is a cost factor, taxes, and manpower is a major cost factor.

High demand has some but not all to do with profit margins. Imports consistenly make money hand over fist for their models, and you can walk down to a Toyota dealer and sift through their Camrys for hours on end.

83% of the dealers losing their franchise sell more used cars than new cars, so why keep em? Since dealer orders are the source of income for the company, since the models sitting on the lot are "bought" and financed when the dealer signs off on them, and your selling more used cars, then it's a no brainer to dump your underperforming units.

Besides Toyota and Honda dealers aren't all that common and still sell alot of cars. Lets face it, if someone wants a new Dodge/Chrysler/Jeep, they'll go and buy one.

How Chrysler Calculates Sales Figures


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post #9 of 15 (permalink) Old 05-16-2009, 12:30 AM
 
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Also its a huge cost Chrysler owns the new cars that sit on the lots. The dealer does not pay for them until they sell them. So lets say that these 789 dealers being closed all have 20 new cars on their lot now multiply that and you have 15780 cars now well use 25k as the cost for each car. You now have 394,500,000 dollars tied up in inventory thats just sitting there. Thats alot of money to be spending on under performing dealers. Lets face it also i know that average number of 20 cars and 25k as an average is way low its probably more like 35k and 40 cars per dealer so were probably really talking about double or triple that amount tied up in inventory that they could cut back on making. The Average new car dealer only sells about 25 to 30 new cars a month before the economic crash now its down to 10 to 15 new cars. Used cars are flyin off lots people are turning in their more expensive leases and buying used cars with lower payments.
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post #10 of 15 (permalink) Old 05-17-2009, 09:27 AM
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Also its a huge cost Chrysler owns the new cars that sit on the lots. The dealer does not pay for them until they sell them. So lets say that these 789 dealers being closed all have 20 new cars on their lot now multiply that and you have 15780 cars now well use 25k as the cost for each car. You now have 394,500,000 dollars tied up in inventory thats just sitting there. Thats alot of money to be spending on under performing dealers. Lets face it also i know that average number of 20 cars and 25k as an average is way low its probably more like 35k and 40 cars per dealer so were probably really talking about double or triple that amount tied up in inventory that they could cut back on making. The Average new car dealer only sells about 25 to 30 new cars a month before the economic crash now its down to 10 to 15 new cars. Used cars are flyin off lots people are turning in their more expensive leases and buying used cars with lower payments.
Chrysler does not "own" cars sitting on dealers lots. Sitting in holding lots/shipping yards, yes.

Chrysler Corporation does not floorplan cars, Chrysler Financial (separate from Chrysler LLC) at one time did, they do not now. When dealers sign off on those truckloads dealers have finance companies that cover those cars (called Floor Plan Financing), the money is paid to Chrysler LLC and it's not CLLC's problem anymore, the dealers may make payments on that car (I can't comment on specifc dealers and their revolving credit lines), but basically dealers buy the car from Chrysler using floor plan financing and turn around and sell it to you.

Floor Plan Financing


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Last edited by dakotaquadsport; 05-17-2009 at 09:32 AM.
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post #11 of 15 (permalink) Old 05-17-2009, 12:06 PM
 
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Thats not right the dealers in Pittsburgh have been given 30 days to sell all the new cars and pay chrysler for them it was just on the News several are going to Sue stating that thats and unreasonable amount of time.
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post #12 of 15 (permalink) Old 05-17-2009, 06:02 PM
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Thats not right the dealers in Pittsburgh have been given 30 days to sell all the new cars and pay chrysler for them it was just on the News several are going to Sue stating that thats and unreasonable amount of time.
News outlets are notorious for having information incorrect. A few papers around here couldn't even read the PDF's correctly about dealers closing and had alot of mis-information about it.
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post #13 of 15 (permalink) Old 05-17-2009, 08:39 PM
 
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That was directly from 2 interviews with 2 of the dealers being closed that they had 30 days to sell all the cars and pay Chrysler for them now did Chrysler Finance them to them i don't have a clue but maybe.
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post #14 of 15 (permalink) Old 05-18-2009, 01:01 AM Thread Starter
 
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Balzekas in Chicago stated on the news that Chrysler did not even to buy back their stock, so I assume that the dealer must own them. I guess either way, people are loosing jobs everywhere, and thats the crappiest part about this whole thing.
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post #15 of 15 (permalink) Old 05-18-2009, 12:51 PM
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There are several other reasons for closing these dealerships. WHile the costs of inventory on the cars are a art of it there is also one HUGE cost that s being overlooked.

1)OEM Parts shipments from the Depots are run twice a day to most delerships requiring someone to load the trucks, process the orders and drive the trucks----All cost money.

2)Stocking certain parts at each dealership (ie oil filters, plugs wires etc.)--- these inventories are bought back each year by Chrysler or in a et window for sales, the left overs of old inventory are also sold to the dealerships at a discount since they are expired...many dealerships use them since the parts are good so they can save money/make more moeny from customers.

3) Training--Each Dealership tech may be certified, but they have to attend chrysler training as well each year for new models etc. This costs big money both on materials and videos and people doing the training.

Just an FYI. It has nothing to o with the overall size of the dealerships from what I have heard is the targets we laid on those with good sales numbers, low customer complaints and who have run a low to minimal buy back parts and such history. Also included is the number of customer order vehicles vs. fleet orders.
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