True North escapes dealer cuts

May 15, 2009 (Star Beacon - McClatchy-Tribune Information Services via COMTEX) -- TN | Quote | Chart | News | PowerRating -- KINGSVILLE TOWNSHIP -- Thursday's mail brought good news -- and a big sigh of relief -- to the True North Chrysler-Jeep-Dodge dealership on Route 193 in Kingsville last week.

The business learned via a certified letter that it will not be part of a nationwide purge of dealerships stemming from the automaker's bankruptcy filing.

"It's nice to get a good letter," said Rob Schimmelpfennig, True North owner. "So many (dealers) didn't get a good letter."

The company, in a motion filed with the U.S. Bankruptcy Court in New York, said it wants to shed 789 dealerships by June 9, or roughly a fourth of its 3,200 total. The dealer network is antiquated and has too many stores competing with one another, according to the filing.

Many of the dealers' sales are too low, Chrysler said, with just over 50 percent of dealers accounting for about 90 percent of the company's U.S. sales. Dealers learned their fate Thursday.

True North's letter said its sales and service agreements had been assigned to the new company that will arise from bankruptcy proceedings.

"It was great news for us," Schimmelpfennig said. "We look forward to growing and finding more ways to serve our customers."

The True North family was fairly optimistic the business would survive. The dealership, the only Chrysler operation in Ashtabula County, has been in existence for 50 years, the last eight under the direction of Schimmelpfennig.

Until the letter was opened and read, employees didn't know for sure.

"You just don't know," Schimmelpfennig said. "It's all totally out of our control."

The days leading up to the final decision meant a "stressful time," Schimmelpfennig said.

"There were a lot of unknowns," he said. "But now we know we're fine."

The rebirth of Chrysler will position the corporation for success, Schimmelpfennig said. "Everyone's going to come out stronger," he said.

Dealers were informed Thursday morning through United Parcel Service letters of whether they would remain or be eliminated. The cuts are likely to devastate cities and towns across the country as thousands of jobs are lost and taxes are not paid.

Chrysler Vice Chairman Jim Press called the cuts difficult but necessary. He said the list of dealers is final and there will be no appeal process.

"This is a difficult day for us and not a day anybody can be prepared for," Press told reporters during a conference call.

A hearing is scheduled for June 3 in U.S. Bankruptcy Court in New York for the judge to determine whether to approve Chrysler's motion. Judges often rely on companies in bankruptcy to help determine what is in their best business interest, such as the closure of dealerships or cancellation of contracts.

Chrysler executives said the company is trying to preserve its best-performing dealers and eliminate ones with the weakest sales. More than half of the dealerships being eliminated sell less than 100 vehicles per year, they said, and account for 14 percent of U.S. sales.

The company is also trying to reduce the number of single-brand dealerships to bring all three Chrysler brands -- Jeep, Chrysler and Dodge -- under a single roof, they said. It also wanted to limit competing dealerships.

"We recognize in the short term we will see some loss of sales," Press said. "But based on the long term ... the dealer (network) is key and it's going to be very strong, powerful, with a much better financial viability."

The 3.5 million customers who purchased vehicles from the affected dealers will be notified about the closures and their warranties will still be honored, said Vice President Steven Landry.

Don Burk, co-owner of Heritage Chrysler Jeep in Ozark, Mo., said he found out that Chrysler plans to get rid of his dealership when he opened his UPS letter Thursday morning.

"Right now I'm processing the information," he said shortly after reading the letter. "I'm sure I'm going to get with my partner and we'll decide what to do from here."

Chrysler dealerships aren't the only ones scheduled to get bad news this week. General Motors Corp. says it is notifying 1,100 dealers that it will not renew their franchise agreements when they expire at the end of September of 2010.

Information from the Associated Press was used in this story.

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