Closed Chrysler Dealerships Suing to Delay Fiat Merger, Prolong Bankruptcy

A group of Chrysler dealers that Chrysler plans to close on June 9 has banded together and asked the bankruptcy court to delay Chrysler’s sale to Fiat. The group, called the Committee of Chrysler Affected Dealers, is made up of about 300 Chrysler dealers from 45 states. Chrysler is planning to terminate 789 dealership franchise agreements early next month as part of its plan to regain viability.

The Chrysler dealer group is asking the bankruptcy court for more time to argue its case, and possibly avoid termination, according to Edmunds Inside Line.

"Chrysler’s proposed asset sale and request for immediate termination of dealer franchises will destroy several hundred independent businesses, ruin the livelihoods of their owners, cause the loss of thousands of jobs and precipitate inevitable personal and business bankruptcies flowing from the closing of the affected dealers," Stephen D. Lerner, an attorney at Squire Sanders and Dempsey said.

Chrysler would benefit two ways by closing down these dealerships. First, it would no longer have to pay the outstanding dealer holdbacks and other sales incentives it offered to dealers. Second, closing down dealerships will effectively raise the price of Chrysler vehicles. Right now, customers can get price quotes from multiple dealerships and force the dealers to compete for the sale. With less competition between dealers, customers will have a harder time negotiating good deals on Chrysler cars.

If the dealers succeed, it could be a cataclysmic event for Chrysler. The more time the company spends in bankruptcy, the harder it will be to recover. Chrysler is already pretty unpopular with the average American, for good reason. Fiat may decide that selling its cars in America isn’t worth the trouble, or that the Chrysler name is so sullied that the cars would sell better badged as Fiats.