NEW YORK – Chrysler has asked a U.S. bankruptcy judge to allow it to eliminate 789 of its 3,200 dealerships nationwide by June 9, including one in Rhode Island and three in Bristol County, Mass., according to a court filing the bankrupt automaker made today.
The four dealership agreements Chrysler is looking to eliminate locally are with Tarbox Motors Inc. on Tower Hill Road in North Kingstown, which is owned by James D. Tarbox; Tarbox Chrysler Jeep on Pleasant Street in Attleboro; also owned by James Tarbox; Motor Mart Dodge on Route 1 in Attleboro, owned by Anthony Cerrone; and Pride Chrysler Jeep on Taunton Avenue in Seekonk, owned by Alfredo M. Dos Anjos.
Tarbox Chrysler Jeep in Attleboro was for decades known as Anderson Chrysler Jeep. It was purchased by Tarbox in 2007 and renamed, according to The Sun Chronicle.
A Chrysler spokeswoman said the automaker will not comment publicly until all the targeted dealers have been notified. They are expected to receive letters today, and are expected to have the right to appeal Chrysler’s decision to the bankruptcy court, The New York Times reported.
Peter M. Grady, Chrysler’s director of dealer operations, said in the filing that “immediate rejection of these agreements is necessary and appropriate to begin the work necessary to complete the transition to a smaller, more effective, and more profitable dealer network.”
Chrysler has been in the midst of a fast-moving and complicated restructuring since it filed for bankruptcy protection on April 30. The company is seeking to sell its most valuable assets to a buyer’s group made up of the United Auto Workers union, the U.S. government, and the Italian car company Fiat SpA, which will run the new Chrysler.
It was Fiat, not Chrysler, that decided which sellers should be included in the new company’s dealership network, according to Bloomberg News.
The number of dealerships in Rhode Island that sell Chrysler vehicles – which also includes Dodge and Jeep products – has fallen by half in recent years, from 14 down to seven, according to the Rhode Island Automobile Dealers Association.
Today’s list of dealerships targeted for closure is not final, and Fiat has a month to decide whether more dealers should be included as part of the new company’s network, Jack Perkins, executive director of the Warwick-based dealers’ group, said this morning in an interview with Providence Business News prior to the release of the list.
Rhode Island and Massachusetts, like other states, have laws that are meant to protect automobile dealers from having their franchises revoked by car manufacturers without cause, Perkins said. However, the federal bankruptcy judge is not required to take state laws into account when determining whether to accept Chrysler’s list.
Furthermore, even if a state court were to find that a dealer’s franchise was wrongfully terminated, that dealership would simply become another creditor in the old company’s bankruptcy proceeding. “I don’t think anyone is very optimistic that the old Chrysler will be in any kind of a position to pay its creditors very much,” Perkins said.
Perkins said the dealers targeted for closure have been left “in a very difficult position,” because they have already bought the cars on their lots from Chrysler, and the company may not have the money to reimburse the dealership for rebates, service covered by warranty, advertising and other costs covered up front by the dealer.
Perkins said many Americans do not understand the relationship between carmakers and dealerships. “The dealer is Chrysler’s customer,” Perkins said. “They are independent. They are, in many cases, family-owned. Almost every one of them is an independent business – the exception is some dealer groups that are public companies.”
“Think about this: even today, being not on that list, there’s a huge risk in selling a vehicle and expecting to be reimbursed for the rebates – because will old Chrysler have enough to pay that?” he said. “So the risk is to the dealer, not the customer.”
Perkins, who was in Washington on Wednesday for meetings with Rhode Island’s congressional delegation, said dealers do not understand why the new Chrysler would want fewer of them available to sell its cars.