Dozens of Illinois dealers expected to lose Chrysler franchises

Tim Landis

Bob Ridings says he hasn't yet decided whether to appeal a decision from Chrysler Corp. to stop selling the automaker's vehicles at three of Ridings' central Illinois dealerships starting next month. Chrysler announced Thursday it was ending its franchise agreements with nearly 800 dealerships, about one-fourth the company's total, as part of ongoing bankruptcy reorganization.

Ridings, owner of Ridings Auto Group, did say that despite Chrysler's decision, he plans on keeping all six of his dealerships open.

Ridings, who has been in the automobile business for 40 years, said he received the notice from Chrysler in a phone call early Thursday.

“You can protest, but I don’t know if we are. The sales have been very weak for the last few years for Chrysler,” said Ridings, who has dealerships in Taylorville, Jacksonville, Decatur, Pana, Lincoln and Monticello.

Chrysler sent notices to 789 of its 3,200 dealerships nationwide. The local terminations would include Ridings’ Chrysler Jeep franchises in Taylorville, Decatur and Jacksonville. Nikles Motor Co., a Chevy, Chrysler, Dodge and Jeep dealership in Mason City, also is on the list.

Only Chrysler products are affected.

Ridings said Chrysler indicated there is a June 9 deadline for dealers to contest the termination as part of the company’s federal bankruptcy reorganization.

He said his plan at this point is to move his new Chrysler and Jeep products to a store in Pana that is not affected by the termination or to sell the vehicles to other dealers. He said he also would sell Chrysler “program” cars at the existing locations. Program cars are from private leases or rental fleets.

Ridings’ dealerships include: Ford, Chrysler and Jeep in Taylorville; Lincoln-Mercury, Jeep and Suzuki in Decatur; Chrysler, Dodge and Jeep in Pana; Rick Ridings Ford-Mercury in Monticello; Jim Xamis Ford, Lincoln-Mercury in Lincoln; Westown Ford, Lincoln-Mercury in Jacksonville and Ridings Jeep in Jacksonville.

Illinois Automobile Dealers Association president Peter Sander said today more than 40 dealers statewide received notices.

“We’re still continuing to see dealer closings throughout the state, in rural areas and metro areas,” said Sander.

The association released figures early this month that showed two-dozen dealerships closed through the first three months of 2009, equaling the total for all of 2008.

Many of the dealers' sales are too low, the automaker said. Just over 50 percent of dealers account for about 90 percent of the company's U.S. sales, a motion filed Thursday in bankruptcy court said.

The move is likely to cause devastating effects in cities and towns across the country as thousands of jobs are lost and taxes are not paid.

A hearing is scheduled for June 3 in U.S. Bankruptcy Court in New York to determine whether to approve Chrysler's motion.

Judges often rely on companies in bankruptcy to help determine what is in their best business interest, such as the closure of dealerships or cancellation of contracts.

Chrysler dealerships aren't the only ones scheduled to get bad news this week. General Motors Corp. says it is notifying 1,100 dealers that it will not renew their franchise agreements when they expire at the end of September of 2010.

In its motion, Chrysler said it has many dealerships that sell one or two of its brands, with Chrysler-Jeep dealerships competing against Dodge dealers as well as other automakers' stores across the country.

"In addition, as suburbs grew and the modern interstate system continued to evolve, longstanding dealerships no longer were in the best or growing locations," the company said in its filing. "Many rural locations also served a diminishing population of potential consumers. Some dealership facilities became outdated. Other locations faced declining traffic count and declining populations."

Chrysler said in its filing that dealers are not competitive enough with foreign brands. Chrysler sold an average of 303 vehicles per dealer in 2008, according to its filing. By contrast, Honda Motor Co. sold about 1,200 vehicles per dealer, while Toyota Motor Corp. sold nearly 1,300 per dealer.

Chrysler said its dealer network "needs to be reduced and reconfigured in a targeted manner to strengthen the network and dealer profitability and to achieve optimal results for the dealers and consumers."

Chrysler has received $4 billion in federal loans and has been operating in bankruptcy protection since April 30. Its sales this year are down 46 percent compared with the first four months of last year and it reported a $16.8 billion net loss for 2008.

Tim Landis can be reached at (217) 788-1536 ortim.landis@sj-r.com.