Sticker shock | Dealers adjust after GM and Chrysler lower the boom
Photo/Mindy Favreau
Bill Sowles, owner of Morong Brunswick, says he's stuck with Jeeps Chrysler asked him to buy before dropping him as a franchise
Brenda Brochu wasn’t surprised when Bowen Bros., the Jeep dealership she manages in Livermore Falls, received a letter from Chrysler on May 14 telling her the car manufacturer wanted to drop her dealership as part of its bankruptcy reorganization. After all, Bowen Bros. is a low-volume dealer selling only one Chrysler brand in a rural area. “We met the criteria,” she says.
Even so, she’s still appealing Chrysler’s decision.
“Would we like to be open? Yes,” says Brochu. “Do we feel we cost the factory any money? No, we don’t. We buy our inventory. We buy our tools. We buy our parts. So the illusion that they are saving a ton of money by closing dealers is not fair.”
Brochu’s not confident an appeal will do much good. She says a group of attorneys is working on the dealers’ behalf to see what can be done. If she can’t get Bowen Bros. off the list of rejected dealerships, she’d at least like more time to unload her inventory of new Jeep
vehicles without taking a loss. Because Chrysler is under bankruptcy protection, it told the dealers it wouldn’t be able to buy back unsold inventory. “It’s too fast basically,” Brochu says, noting that dealers only have three and a half weeks from when they received the letter May 14 to get rid of their inventory. “That’s tough.”
May was a big month for car dealers in Maine. In the span of two days, May 14 and May 15, both Chrysler and General Motors sent letters to dealers they want to drop because of their financial woes. Chrysler’s list includes four Jeep dealerships in Maine: Morong Brunswick, Ballenger Automobile Co. in Sanford, Fuller Automall in Rockland and Bowen Bros. But General Motors has not sought bankruptcy protection, so its list has not been made public. From reported estimates, three or four GM dealers in Maine received letters saying their contracts are being reconsidered.
One of those GM dealers is Steve Hartley, owner of Hartley Automall in Newport, which sells GMC vehicles. He received a letter from GM on May 15 telling him his contract could cease in October 2010. “As it stands now, no, we probably wouldn’t continue,” he said, adding that the economic outlook could change over the next year and a half.
Tom Brown, president of the Maine Automobile Dealers Association, said the news affects just a handful of dealers in Maine’s auto sales industry, which employs 6,000 people at 131 dealerships and generates 20% of the sales tax that goes into state coffers. The greater impact would likely be among Jeep owners, who would have to travel greater distances for parts and service, he says.
Changing course
As of May 22, Brochu still had eight Jeeps on the lot and all are heavily discounted to move since she could be left eating any she can’t sell. Under the current arrangement, she says any Jeeps left on her lot after June 9 would have to be sold as “used” cars.
While Chrysler told dealers it can’t buy back the inventory, it did say it would help coordinate the sale of unsold inventory to other Jeep dealers. But Brochu says that’s nothing to be excited about. She says it varies on the model, but that she would take a $2,500 to $3,500 loss per vehicle under Chrysler’s plan. “I don’t call that helping,” she says. “And I’m a small dealer. Imagine a dealer with 40 to 50 units still on the ground.”
Chrysler also said it would not buy back Jeep parts and special tools from the dealerships. It is willing to compile a list of parts and tools inventory and make those available to other dealers in case someone wants to buy the stuff. “There again, essentially no help,” Brochu says.
Though not unexpected, the news that Chrysler wants to drop them is bittersweet for Brochu and her father, Alfred Fuller, who owns the dealership. A few months ago, Bowen Bros. received a plaque from Chrysler to celebrate its 50th year as a Jeep dealer. On May 14, it received a letter from Chrysler, along with 787 other dealers, that laid out the car manufacturer’s plan to drop the dealership as part of its bankruptcy reorganization. “We wish there was a better way, but there isn’t,” Chrysler’s letter says.
Bill Sowles, owner of Morong Brunswick, says his letter from Chrysler is ironic. “Two to three months ago, they were begging us to buy cars. ‘You have to help us out and buy cars to let us help you,’” Sowles says the company told him. “Which is kind of ironic because now dealers they chose not to take along are stuck with all the cars they bought to do them a favor, which doesn’t seem right, but we have no rights under the bankruptcy laws.”
Did Morong Brunswick buy more Jeeps when Chrysler begged? “Sure we did,” he says.
The dealers Mainebiz spoke with said losing the franchises won’t sink their businesses. Hartley Automall may lose its GMC line, but Hartley says that makes up only about 20% of his business, while his Chrysler franchise represents the remaining 80%. (Hartley didn’t receive a rejection letter from Chrysler). “Although I’m concerned and saddened that we have to go through this, I’m not terribly concerned because I’m still a Chrysler dealer and it’s the bulk of my business.”
Sowles at Morong Brunswick, which also has a Volkswagen dealership and sells used cars, says he honestly hasn’t had the time to run the numbers to find out what this might mean for his bottom line. Even if he tried, it would be tough, he says, because he has two different brands and the expenses are comingled. “My heat and light bill won’t go down. My rent won’t go down. There’ll be some savings, but I still have an overhead.”
Still, he doesn’t plan on laying anyone off as a result of losing the GM franchise. “If we can’t make it up in other franchise and used cars, then yes, we’re at risk, but my employees and myself have a real positive attitude, and the attitude that we’re going to make this work and come out on the other end and be successful.”
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