With cards and cars you need dealers. So as Chrysler and the federal government play, in effect, a high-stakes poker game hoping the car company will emerge stronger from bankruptcy, there are concerns whether local dealerships can survive the interim uncertainty without folding.
“None of us really know,” said Brook Stoutenburgh, who has Chrysler vehicles at Hyde Park Motors and who has owned car dealerships for some 35 years. “Everything is out of our control now; it”™s in the court”™s control. It”™s kind of a scary situation.”
“I”™m a little shocked there isn”™t much in the media or anywhere about the dealers,” he said. “There doesn”™t seem to be any protection for these dealers that are going out of business and there are going to be a lot more of them going out of business.
“The government will back warranties, and is helping suppliers and manufacturers but not doing anything to help ensure the dealer network survives,” Stoutenburgh said. “And guess what? Without a dealer network you”™ve got nothing.”
He said the problem is not only with Chrysler, but with General Motors dealers, as well. With more than three decades experience selling autos, he said he has endured gas shortages and recessions and even a previous bailout for Chrysler.
“This is the worst we”™ve had,” he said.
Though its production lines have shut down, Chrysler is still selling cars during the bankruptcy and the federal government has guaranteed the warranties on all Chrysler vehicles. In that sense, the bankruptcy need not deter buyers, but Stoutenburgh said the problem goes deeper than one company”™s bankruptcy and is symptomatic of larger problems. He said the sale of cars was already noticeably diminished even before last fall”™s economic nosedive and said it has yet to recover.
“I think people feel comfortable from the standpoint their warranty is backed, but since people are so concerned about the economy and their own jobs, they are putting off making decisions to buy cars, whether it be new or used,” said Stoutenburgh. “I”™m sure a lot of people would love to have a new car, but don”™t dare buy anything now.”
The Chrysler bankruptcy may have a positive outcome if it allows the car company to reposition itself financially and technologically with the help of the federal government and Fiat, the Italian automaker. In effect, the bankruptcy is not the end of Chrysler but a chance for a new beginning.
Chrysler is entering Chapter 11 proceedings under bankruptcy law, which is for reorganization, as opposed to Chapter 7, which is liquidation. Part of the reorganization will be to permit Fiat”™s expertise in smaller, fuel-efficient cars to make inroads into the Chrysler brand, and into Chrysler show rooms.
But Stoutenbugh said there will be significant lag time before the Fiat option is available for customers at Chrysler dealers. Company officials say that Fiats will arrive on dealer lots within about 18 months, but Stoutenburgh is skeptical they will arrive that quickly.
“I think before we see any help at the dealer level from Fiat anywhere in the United States, that is two years away,” he said. “Those cars are going to be built here; they are not just going to be shipped and sold they will actually be made by Chrysler.”
While that is potentially positive for the company and for the economy, he said, it is nerve wracking for dealers who are trying to stay afloat. He said the Jeep Grand Cherokee is still a top seller due to its four-season versatility but said the market is moving toward smaller, gas-sipping cars.
“It always has happened that consumers buy small cars as gas prices rise,” said Stoutenburgh. He said that consumers are now cautious about the current economy and the future cost of gasoline. “This time, people are just going to wait and see,” he said, adding that his shop is servicing and repairing more cars that in the past would have been traded in for a new or used ride. But if the wait-and-see attitude endures too long, dealers will not be able to stay in business.
“I”™m telling you, all the car dealers are struggling,” said Stoutenburgh, including foreign dealers like Toyota and Honda whose sales have declined sharply in the recession. “When bigger dealerships lose 30 percent of sales business, it hurts them a lot more then it hurts a smaller dealership like me. Every crisis in the past, it was the big dealers that went out of business first and the small dealers that hunkered down and survived.”
But, he said, right now, dealers of all sizes are struggling and there will be a shake out to accompany the Chrysler bankruptcy and overhaul at General Motors. But Stoutenburgh said the courts and corporations need to pay more attention to the dealer network.
Dealer concerns “are falling on deaf ears,” Stoutenburgh said. “I know the dealer network will not be what it is now, but we”™re at ground level. It begins and ends with us and if we”™re not here, guess what, nothing is going to happen. So the government better start thinking about the dealer level pretty darn quickly.”
