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.
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
2006 Dakota SLT. 4.7L 4x2 3.92 LSD
04 Neon SXT <--Go Kart
08 Avenger SXT 2.7 MyGig, Sunroof, 18"s
Past: 93 Intrepid ES 3.5, Water Blue
99 Neon Highline