Chrysler is to shut down 789 of its 3,200 US dealerships in a bid to cull costs and return to profitability. About 40,000 jobs will be lost.

Chrysler's next big step in trying to claw its way back to the land of profit is to shut down 789 of its dealerships in the US. The company currently has around 3,200 dealerships nationwide. At the height of its popularity during the mid-1960s, Chrysler operated around 6,500 dealers in the US alone, a number that had shrunk to 4,100 by 2001. As things stand 50% of its dealers account for 90% of sales.

The White House's auto task force says despite aid being given to Chrysler, the government had nothing to do with the company's dealer consolidation plan.

In explaining the decision to reduce dealers Jim Press, Chrysler vice chairman and president said: "The unprecedented decline in the industry has had a significant impact on our sales and forced us to reduce production levels to better match the needs of the market."

Chrysler's head of dealer operations Peter M. Grady has also noticed a worrying trend over the years. "As suburbs grew and the modern interstate system continued to evolve," he said, "longstanding dealerships were no longer in the best or growing locations. Many rural locations also served a diminishing population of potential consumers. Some dealership facilities became outdated. Other locations faced declining traffic count and declining populations."

The affected dealers on the other hand, expect one-to-one negotiations over the closures. According to David Hyatt, the spokesman for the National Automobile Dealers Association, the organisation's members could get a raw deal out of the situation.

"It's not a haircut for dealers," said Hyatt. "It's a beheading. The market picks winners and losers, and it's so brutal right now, dealers don't need Chrysler or GM to tell them which ones should go out of business."

In total about 40,000 jobs could be lost as a result of the mass culling.


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