Closing Chrysler Dealers Are Cheaper Than Survivors - Edmunds
May 21 2009 - 4:53PM
Dow Jones News
Chrysler LLC dealers being dropped by the auto maker have been
selling vehicles for substantially less than those slated to
remain, according to retail specialist Edmunds.com.
The company announced plans last week to drop a quarter of its
U.S. dealers who, according to Edmunds, had been selling vehicles
at lower prices for months.
However, expectation of the closure plans saw the pricing gap
widen substantially for Chrysler and Jeep brand dealers in May,
though those at Dodge outlets didn't change significantly.
Chrysler is embroiled in legal challenges with many dealers
unhappy at being dropped, and the Edmunds data suggest the market
could be vulnerable to price wars between surviving dealers and
those earmarked for closure.
Edmunds sampled transaction prices at dozens of Chrysler dealers
around the country. They found soon-to-be closed Chrysler brand
stores sold vehicles for $2,672 less than the average dealer in
May. Jeep dealers faced with closure had prices $1,204 below the
average.
Before May, the differences ranged from around $100 to
$1,000.
The Edmunds data comes amid anecdotal evidence of severe price
cuts as dealers race to clear out inventory before being dropped by
Chrysler.
U.S. auto makers have argued that an oversaturation of
dealerships drives down profitability, in part because dealers get
into price wars that drive down revenue.
General Motors Corp. (GM) this week sent letters to 1,100 of its
dealers, notifying them of its plans to terminate their franchise
agreements by October 2010.
-By Sharon Terlep; 248-204-5532; sharon.terlep@dowjones.com.