Automaker works to reassure its network of dealers
BY TIM HIGGINS and KATIE MERX • FREE PRESS BUSINESS WRITERS
As Chrysler owner Cerberus Capital Management continues merger talks with General Motors Corp., one option not being considered is splitting up the Auburn Hills automaker among different buyers, the Free Press was told Wednesday.Cerberus' preferred play is merging Chrysler LLC with GM in a deal that gives the private equity firm a stake in the combined company and a greater share of GM's financing arm -- GMAC.
People familiar with those talks said Wednesday they believed Cerberus was tepid toward an alliance with Renault-Nissan, another Chrysler suitor that is thought to seek only a minority stake in the company.
GM believes it can find billions in possible savings by merging with the No. 3 U.S. automaker, and GM executives are drooling over the idea of tapping into Chrysler's pile of cash, a person familiar with the thinking said.
Chrysler has reported it had $11.7 billion in cash at the end of June.
3,500 dealers on edge
Meanwhile, Chrysler is working to reassure its independent dealers, which were already hit hard by the credit squeeze and now face the brutal reality that their automaker is on the sales block -- again.
Jim Press, Chrysler's president overseeing sales, and Steven Landry, executive vice president for North American sales, held a conference call earlier this week with dealers in an attempt to soothe them, dealers said.
"They said, 'Look, we don't know much either,' " said one dealer who participated in the call.
Press, talking with reporters Wednesday after speaking at an engineering conference at the Renaissance Center Marriott, declined to discuss reports that Cerberus is negotiating Chrysler's sale. He said during his speech that Chrysler has been "able to stop the high level of negative cash flow," which might be why "a lot of people have been smelling around the Chrysler vault lately."
Dealers are beyond anxious.
"We're getting roughed up pretty good," said Tom Barenboim, owner of a dealership in Methuen, Mass., near Boston. "I am just trying to grasp on to anything positive."
After acquiring a neighboring Dodge franchise last year, Barenboim said, he was about to begin renovations but is now concerned. "I don't want to spend a lot of money for naught," he said.
Barenboim joined other dealers in saying they were focused on selling the vehicles they have as speculation swirls about Chrysler's future.
Chrysler's 3,500 dealers find themselves in an already tough market of declining sales, poor consumer confidence and tightened credit rules that disqualify many potential buyers.
U.S. sales slide
Earlier this month, Grant Thornton LLP predicted the number of car dealership closings will accelerate through next year, with an estimated 3,800 dealerships needing to close in order to maintain sales per dealer at last year's level of about 750 units.
Chrysler's U.S. sales are down around twice as much as the industry average.
"Chrysler dealers are suffering," said Paul Melville, a partner with the Grant Thornton global automotive practice. "There is a lot of concern. ... There is a lot of duplication of brands, there's a lot of duplication of dealers. Everyone knows there are too many dealers in the U.S. anyway and everybody is looking around saying, 'Is it going to be me?' "
A little over a year ago, Cerberus acquired majority control of Chrysler, leaving Daimler AG as a minority partner.
The Free Press has reported that officials from Renault-Nissan have visited Chrysler facilities, and it has been reported that Cerberus is considering having Chrysler join the Renault-Nissan alliance.
Representatives for the companies are not commenting on the talks.
Several analysts have speculated that Chrysler could be broken into different pieces, with Nissan perhaps getting the Dodge Ram pickup program and GM eyeing the Jeep brand and minivan platform, but a person with knowledge of Cerberus' thinking denied that Wednesday.
While any sale of Chrysler could result in layoffs, plant closures and fewer dealerships, Dick Scott, owner of Dick Scott Automotive Group, which owns a Nissan dealership as well as Chrysler, Jeep and Dodge dealerships, said he sees potential advantages for a deal between Nissan and Chrysler.
"To form an alliance with anybody, and do away with product, I don't think that will please any Dodge, Chrysler or Jeep dealer," he said. "But as a Nissan dealer, if there is a going to be an alliance, I think it would be advantageous to me, because I am a Nissan dealer."
Overlapping products
If a GM-Chrysler merger occurs, Chrysler's brands could become just like Chevrolet, Pontiac and Buick. Overlapping brands could be dealt with after the industry has moved past the current turmoil, the Free Press has reported.
Several dealers spoke privately about their anxiety over Chrysler's future. They declined to be named to avoid fouling relations with Chrysler or a future owner.
"I don't know what to say. The GM idea sounds good, but if they're going to close all of us down, that doesn't sound too good," one dealer said. "We need somebody who sticks with us once and for all."
Tony Viviano, chairman of Sterling Heights Dodge, is frustrated with all of the talk and is urging his people to remain focused on selling vehicles.
Viviano said he's seen some easing in the credit market and is confident that if Chrysler is sold, his dealership will be OK.
"Is it bad? Well, it's not great. I am not out jingle belling but I will tell you one thing, I am convinced I'm going to be a survivor. I can remember when Chrysler was going broke ... they had nothing," he said of the company troubles in the 1980s. "But you see, you've gotta just have patience and you gotta be focused."
Posted Monday, Oct 20, 2008 at 1:33 pm in 
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