Monday, July 16, 2007

Chrysler bans 463 stores from auctions

California Chrysler, Dodge and Jeep dealer Richard Carpenter is banned from Chrysler group factory auctions because of low new-vehicle sales. Carpenter says he will buy "more Hyundais and Kias for our used-car lot."
Photo credit: MARC LONGWOOD

Dealerships fell short of factory's sales targets
Bradford Wernle
Automotive News
July 16, 2007 - 12:01 am

Richard Carpenter's Oroville Motors is one of 463 Chrysler dealerships facing a dilemma: As of Tuesday, July 10, Carpenter no longer could stock his northern California Chrysler, Dodge and Jeep store by attending Chrysler group factory auctions of used cars.

In April, Chrysler announced the ban of some dealerships that sell almost no new vehicles, relying solely on the sale of low-mileage used cars. In effect, these dealerships have become used-car stores with Chrysler signs out front.

Each month, Chrysler estimates the number of new vehicles that each dealership should sell. Dealers who do not meet at least 50 percent of this monthly target - dubbed the "minimum sales responsibility" - are banned from factory auctions until they sell enough new vehicles.

Steven Landry, Chrysler executive vice president of NAFTA sales, global marketing, service and parts, says many Chrysler dealers who didn't meet their sales requirements "were basically in the used-car business anyway."

Carpenter retorts that the ban hurts Chrysler because it reduces the number of auction buyers. "Instead of Chryslers and Jeeps, we'll be buying more Hyundais and Kias for our used-car lot," says Carpenter, who adds that his store is profitable even though he sells only two to four new cars a month.

He says he'll find other ways to buy Chrysler products. For example, auctions organized by Chrysler Financial and car rental companies are open to all dealers.

Policies blamed

Many dealers have been forced to rely more heavily on used cars because of Chrysler's own policies, says Doug Alley, co-owner of Alley Chrysler in rural Kingsport, Tenn.

Alley and other dealers contend Chrysler has raised its sales targets to levels they can't possibly achieve.

Alley, who also has been banned from factory auctions, says it's nearly impossible for a stand-alone Chrysler store to sell enough new cars to be viable. Once the Plymouth franchise died in 2001, the Chrysler brand alone couldn't sustain a dealership, he says.

"We got no choice but to be in the used-car business if we want to stay in business," Alley says. "Yes, we're putting customers in Chrysler program cars, but at least they're driving Chrysler product."

But Chrysler group officials say dealers had plenty of warning to boost sales and avoid the ban. Once Chrysler notified dealers April 3 that the rule was going into effect, "it was amazing how many dealers propped themselves up over 50 percent," Landry says.

Chrysler spokesman Jason Vines says "almost 90 percent of the dealers are doing what they were asked to do." Dealers who pump up new-car sales can quickly regain auction privileges, Vines adds.

Auction ban
Here are key facts about the Chrysler group's ban of some dealerships from its auctions.
  • Dealerships banned from closed auctions: 463
  • Total Chrysler group dealerships: 3,700
  • Ban period: July 10-Sept. 30
  • Reason for ban: Some stores rely too heavily on used-car sales
  • Which dealerships are banned? Those that fail to sell at least 50 percent of the new vehicles that Chrysler estimates a dealership should sell each month
  • What's a closed auction? A factory-sponsored auction open only to dealers holding that factory's franchises

What to do?

Jason Childre, general manager of Childre Chrysler-Dodge-Jeep in Mil-ledgeville, Ga., says the ban puzzles him. Over the past few years, Childre built a strong business selling used rental cars. "It's mind-boggling to me they're going to punish you for buying too many (used cars) from them."

Childre admits that he might have relied too heavily on rental-car sales. But he says he had no choice after hot new vehicles became hard to obtain from the factory. Former customers were switching to metro Atlanta stores that could get vehicles such as the hot-selling four-door Jeep Wrangler.

Chrysler wouldn't let him have hot products unless he agreed to buy vehicles he couldn't sell, Childre contends.

"It's really a shame," says Childre, who says his dealership regularly scores well on customer satisfaction surveys. "I'll bet our financials are as strong as any dealer of any size they've got."

Childre says he thought he was supporting Chrysler by buying program cars: "We were buying (rental) cars because we were supporting the folks we've got a brand sign for. But we're not going to support a bunch of jackasses that want to take our rights away from us. We can buy Toyota. We can buy Honda. We can buy GM."

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