Behind the Wheel with Phil Lebeau

Chrysler's Cutbacks On Production, Dealers--Will Plan Work?


As we reported this morning, Chrysler executives are discussing a plan that would call for the struggling automaker to aggressively shrink its product and dealer line-up in a move to get the company back in the black.

On paper, the idea of cutting models and putting the Chrysler, Jeep, and Dodge brands all under one roof at fewer, but more profitable, dealerships makes sense. Like any diet, you get rid of the fat, you should be healthier. But also, like any diet, what sounds good in theory, is harder to achieve in real life.

The trimming of the product lines will not be tough. The tricky part is making sure you have the right mix of distinctive products that will sell. With three distinctive brands, Chrysler has the right strategy to make sure that someone walking into a Chrysler, Dodge, Jeep dealer will find what they are looking for. The problem is going to be getting all three brands under one roof.

Chrysler to Cut Models

Like Ford and GM , Chrysler is weighed down by too many dealerships that cut into profit per vehicle, and make it tough for the company to prosper. The new plan to get rid of dealerships by buying them out, merging them, or making the product line-up so restrictive dealers can't prosper selling just Chrysler or just Dodge makes sense.

But in reality, eliminating those dealerships will take billions of dollars (the average dealership goes for $2 million) and years to accomplish. Chrysler can't just take dealerships away. And there are many dealerships owned by the same person or family for decades, so those people don't want to sell. For some, the overhead is paid off, they really make money servicing vehicles, and they'll be damned if their dealership is going to lumped in with another one.

Like I said, diets are tough. They always sound great at the start of the year.

Questions?  Comments?