Chrysler consolidates 18 dealers, talks with 80 more

September 20, 2002

Auburn Hills, Michigan Jeff Green writing for Bloomberg reported that DaimlerChrysler AG's Chrysler has consolidated Jeep, Chrysler and Dodge brands at 18 U.S. urban dealerships and is in talks with 80 more in an effort to boost sales at each outlet and discourage them from selling rivals' vehicles.

Chrysler wants to combine as many as 1,000 of its 4,259 franchises into 500 outlets, Gary Dilts, senior vice president of sales, said in an interview. Chrysler began the voluntary plan for urban dealers last year. The dealerships agree not to sell rivals' vehicles at those locations.

"The more sales dealers can get from fewer dealerships, the better" as they are able to reduce costs, said Don Ray, a consultant at Dixon Odom PLLC and George P. Jones Services Group, which advise dealerships on matters such as buying and selling the businesses.

The third-biggest U.S. automaker is trying to increase sales of cars and trucks by 1 million units annually by 2011 under a plan to spend $30 billion in the next five years on new and updated models, Chief Executive Officer Dieter Zetsche has said. Combining dealers will help that effort as the retailers focus on Chrysler's brands, Dilts said.

About a third of Chrysler's dealers now also sell rivals' vehicles, with about 460,000 such cars and trucks sold annually. The automaker wants to cut that by half.

The cost to dealers who agree to combine may total as much as $15 billion for new locations and other investments, Dilts said. Chrysler wants to have 100 more combined urban dealerships by late next year, he said. The automaker had allowed combined dealerships in rural areas before starting the effort for urban outlets.

Sales Increase

The new Crowley dealership in Bristol, Connecticut, combined an existing Jeep-Chrysler outlet with a Dodge franchise and stopped selling Kia Motors Corp. products alongside the Chrysler brands, owner Ken Crowley said. The dealership had first-month sales in August of 140 cars and trucks, up from 110 in the separate locations, and expects to grow to 200 monthly, he said.

Chrysler combined 30 separate dealerships into the first 18 urban locations, halting sales of six rival brands, said Christine Mackenzie, vice president of dealer operations. The automaker has studied 802 outlets where combining with another dealership might increase sales and eliminate competing brands from the sales floor, she said.

Stuttgart, Germany-based DaimlerChrysler's U.S. shares fell $1.70 to $36.50 at 4:16 p.m. in New York Stock Exchange composite trading. The shares have fallen 12 percent this year.