Cerberus/Chrysler gives underperforming dealers six months to increase sales
Cerberus has decided to shake up Chrysler in an attempt to reduce the company's losses. There is no time for discussion and Chrysler has announced that it will give underperforming dealers six months to increase sales or face pressure from Chrysler to shut down.
Technically, state laws afford franchises with a good deal of protection against manufacturers and such actions could potentially end up in court. However, the slightest pressure may be enough to get rid of some less successful dealers. After so may difficult years, some of them will probably give up. These closures will probably not be sufficient to allow Chrysler to compete effectively with Toyota's highly efficient dealers, but it will still be one better than Ford or GM. For each percent of market share, GM has 300 dealers while Toyota has only 90. Chrysler has 270 dealers for each percentage point.
How can a manufacturer pressure a protected dealer? As American carmakers do not build on demand but in advance they can offer the least attractive models and colours to the underperforming dealers. They can also ban them from accessing special auctions. Two weeks ago this is exactly what Chrysler did. A total of 450 dealers were forbidden to buy used cars at its factory auctions.