Chrysler dealership to remain open; GM lot still awaiting word on fate

One local dealer will remain open and another will wait for word about its future following announcements this week from Chrysler LLC and General Motors Corp.

General Motors on Friday told about 1,100 of its dealers — one in five — that they would be dropped by late next year, adding to the economic pain radiating from the beleaguered Detroit automakers to cities and towns across the country.

Including Chrysler’s decision Thursday to eliminate a quarter of its own, about 1,900 dealerships learned that they would be forced either to sell fewer brands or close altogether.

Kay Pedersen, co-owner of South Star Chrysler, 327 W. 23rd St., said the dealer would remain open since its name did not appear on the list of dealers slated for closure.

Jim Tawney, owner of Creason-Tawney, a local Chevrolet dealer at 2324 E. Logan St., said he received a letter, but it did not say whether the franchise would be renewed. Tawney said he expects to know more information June 2.

Dealers in Lawrence received mixed news Thursday and Friday.

While some GM dealers received letters saying they’d remain open, Jim Clark Motors, Lawrence’s longtime Chrysler dealership, received word that Chrysler intended to sever its dealership agreement.

The GM dealerships will be eliminated when their contracts end late next year.

Several hundred of the GM dealers already knew they were headed for closure, but most of them learned for the first time Friday. An industry group says the GM and Chrysler cuts combined could wipe out 100,000 jobs.

Both GM and Chrysler are scrambling to reorganize and stay alive in a severe recession that has pummeled car and truck sales for U.S. automakers, which had already been losing market share to foreign companies for decades.

Chrysler LLC already is in bankruptcy protection, and industry analysts say General Motors Corp. is making its cuts now in preparation for a bankruptcy filing June 1. The company says it would prefer to restructure out of court.

GM declined to reveal which dealers will be eliminated. Many dealers vowed to fight, first through a 30-day company appeal process, then possibly in court.

GM’s dealers are protected by state franchise laws, and the company concedes it would be easier to cut them if it were operating under federal bankruptcy protection. GM says it’s trying to restructure outside of bankruptcy because of the stigma of Chapter 11.

Chrysler dealers have fewer options because the company already has filed for bankruptcy protection, and federal bankruptcy judges generally trump state law. And Chrysler said on Thursday that its cuts were final.

GM outlined a plan to cut about 40 percent of its 6,000-dealer network by the end of 2010 in hopes of getting the company back on its feet. Besides the 1,110 dealership cuts, the company will shed about 500 dealerships that market the Saturn, Hummer and Saab brands, which GM plans to phase out or sell.

And when the surviving dealers’ contracts are up in late 2010, GM will cut still more by not offering renewals to about 10 percent of the dealers who are left. Dealers could stay open selling used cars or other brands, but GM and Chrysler cuts will still leave cities across the U.S. with empty buildings, vacant lots and perhaps hundreds of thousands of dollars in lost tax revenues.

FedEx letters bearing the bad news began arriving Friday morning at GM franchises around the country. The letter states that dealers had been judged on sales, customer service scores, location, condition of facilities and other criteria.

While the targeted dealers represent about 20 percent of GM’s total, they make only 7 percent of its sales, the company said.

The cuts will allow the surviving dealers to expand the size of their markets, so they have a better chance of staying healthy and attracting private investment, said Mark LaNeve, GM’s North American vice president of sales and marketing.

The Obama administration’s auto task force, which is overseeing the GM and Chrysler restructuring because both have received billions of dollars from the government, was aware GM would cut dealers, LaNeve said. But he stressed the company made the decision on how many and where.

Chrysler is aiming to close its nearly 800 dealers by June 9, and those outlets may try deep discounts to clear out their remaining inventory. But in the long run, prices for cars and trucks probably will rise for customers as dealerships disappear.