Cornell University Expert on The Closing of Chrysler Dealerships

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“Chrysler’s decision to close 789 dealerships was not an easy one to make. The closings will have a negative impact on their community – the dealerships spend thousands of dollars supporting community charities, sporting teams, and other worthy activities and even more could be lost from the impact of lost sales to the community.

“While it is traditionally very difficult to close dealerships because of the tough state laws protecting dealership rights, this unique ‘opportunity’ to reduce dealerships is possible because of bankruptcy. And the reality is that currently Chrysler has way too many dealers to support their total sales. This causes Chrysler, Dodge and Jeep dealerships to end up competing against each other instead of other companies.”

In other words, customers shop at 5 different Chrysler, Dodge or Jeep dealers to get the best price instead of shopping at Chrysler, Ford and GM to get the best car. All of the time, energy and expertise of an individual dealership is spent wooing the same group of customers as competing dealerships, and they reap no benefit if another dealer gets the sale.

“So a tough and emotional decision, and one that will cause Chrysler to lose sales in the short-term but that will enable a stronger dealer network and resale values in the long-term as fewer cars will be sitting on too many dealers’ lots.”

Art Wheaton, senior extension associate in workforce, industry and economic development in Cornell University’s School of Industrial and Labor Relations