Chrysler tries to make a comeback in cities it left in 2009

Mark Chasey of Deery Brothers of Ames, Iowa: “There's been a three-year break, so you're starting from really ground zero. We lost some people that purchased other brands, I'm sure. Our job is to get the word out that we're here.”

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Going into its 2009 bankruptcy, Chrysler was dissatisfied with both of its dealers in Ames, Iowa.

Chrysler's solution was to abandon Ames, a city of 59,000 that is the home of Iowa State University and No. 9 on CNNMoney's 2010 list of Best Places to Live in the United States.

The automaker terminated both dealers' franchises -- along with those of the next-closest store -- and urged area customers to drive to much smaller towns for new vehicles or service.

"They just wiped the slate clean," says Bruce Anderson, president of the Iowa Automobile Dealers Association. "Ames is just too big to not have Chrysler representation."

But for more than three years, Chrysler did not sell a single vehicle in Ames or anywhere else in Story County, which has about 90,000 residents in the center of Iowa.

Chrysler vanished from Kalamazoo, Mich., population 75,000, for almost two years. Kingsport, Tenn., a city of 50,000, remains without a Chrysler dealership, though one is under construction.

Chrysler dealerships suddenly disappeared from communities across the United States as part of the company's restructuring. A bankruptcy judge allowed Chrysler to cut 789 U.S. stores, reasoning that the company had too many dealers for Chrysler and its retailers to make money. Most of the eliminated stores were close to dealerships selling other Chrysler brands, or in small towns where Chrysler decided it no longer needed to be.

But in Ames, Kalamazoo, Kingsport and some other decent-sized markets, Chrysler's approach was riskier and more unusual. It decided to simply start over, ceding untold business to competitors in the interim, rather than working with established dealers who had been there for decades.

In some of those cities, the company already has higher sales than before its restructuring, helped by the rebound in auto sales since the recession. But in others, Chrysler is only in the early stages of regaining customers, and the time missed allowed rivals to grow at its expense.

"Chrysler must have missed some sales when it was shut down," says Aaron Zeigler, president of Zeigler Auto Group, which built a Chrysler-Dodge-Ram dealership in Kalamazoo last year. "But we came back much stronger. They're much more money-ahead even though they were dark in the market for a year and half."

Lost loyalty

Chrysler returned to Ames two months ago, when one of Iowa's big auto retailers, Deery Brothers, established a store there. Deery Brothers of Ames is temporarily housed in the former Benson Motors Dodge building until a permanent home can be built.

"There's been a three-year break, so you're starting from really ground zero," says the general manager, Mark Chasey.

Chasey acknowledges that it would be some time before his new store reaches the volumes that the former Ames dealerships generated for Chrysler, though he doesn't know how many they sold or how long that might take.

"We lost some people that purchased other brands, I'm sure," he says. "Our job is to get the word out that we're here."

In the long run, Chasey says Chrysler will be more successful in Ames than it was, in part because all of its brands will be at one location. Previously, the Dodge and Chrysler-Jeep dealerships were on opposite sides of U.S. Route 30.

"The facility is going to be brand new, state-of-the-art, just the way they want it," Chasey says.

Anderson, of the Iowa dealer group, praises Deery Brothers but says Chrysler's absence from Ames has undoubtedly taken away some would-be customers.

"They're probably more loyal to their local community and their local dealer than they are to a brand," he says. "So there may have been some migration to the local GM dealer or Ford dealer."

4 brands together

Chrysler officials declined to discuss the company's strategy in specific markets but said dealers nationwide are closing more sales and generating more profits since the network was thinned.

"The whole dealership network has improved through our optimization of the network," says Chrysler spokesman Ralph Kisiel. "The metrics are up in every single category."

Kisiel says a top priority for Chrysler was consolidating its three core brands -- four now, after Ram was spun off from Dodge -- at as many dealerships as possible, through an effort it called Project Genesis. Indeed, of the terminated dealerships in Ames, Kalamazoo and Kingsport, none sold the company's full lineup.

But in most communities where that was the case, Chrysler eliminated a poorer-performing dealership, especially if it sold only one brand, then created Genesis stores by giving those franchises to others nearby. That's what the company did with three pairs of dealerships in suburban Denver; for instance, it cut King Jeep and awarded Jeep to Prestige Chrysler-Dodge three miles away.

In Kingsport, just across the border from Kentucky, Jeeps were sold at one store and another dealer, Doug Alley, carried Chrysler and Dodge. Both were in a busy strip of auto and big-box retailers, and both were terminated.

Now, Victory Automotive Group of Canton, Mich., plans to open Tri-Cities Chrysler-Dodge-Jeep-Ram on six acres along the same highway in December or early 2013.

Alley, left with Jaguar and Saab, closed about 18 months after Chrysler cut him loose. He says Chrysler began seeking a new, four-brand dealer in the city, but he agreed as part of a settlement with the company not to pursue the franchises.

Since June 2009, the nearest dealership selling and officially servicing Chrysler vehicles has been 16 miles away, in Johnson City. Alley says he thinks few of his former customers elected to go there.

"Most of the letters and e-mails we got said that if we weren't going to be here selling Chryslers, they were going to go to another brand," Alley says. "They said when we closed up, they were done with Chrysler products."

Chrysler's Kisiel says the company still has some open points left by the 2009 terminations but "we're pretty much at where we want to be." That means most of the communities that Chrysler has left behind are destined to remain without a dealership in the foreseeable future.

"It was always our intention if there was an open point created during that bankruptcy reorganization process to go back in there with a [Genesis] dealership," Kisiel says.

Altered plans

The arbitration process created by Congress in late 2009 to help rejected dealers altered Chrysler's plans in some cities, including Kalamazoo. The Jeep dealership there, Orrin B. Hayes, which operated out of a small downtown location, won its case against Chrysler and resumed sales last year.

Hayes Jeep moved to a renovated showroom amid other dealerships on the city's west side, across the street from the new Zeigler store. From Chrysler's perspective, that is an improvement from the previous situation, in which three single-brand stores were scattered across the city, yet not what the company had in mind for Kalamazoo.

"They accomplished probably what their biggest goal was, which was the facility that they wanted in the location they wanted," says Amy Krone, general manager of Hayes Jeep.

Today, Hayes sells about 16 to 20 Jeeps per month. Across the street, Zeigler's store sells about 80. That compares with roughly 20 that the three separate Kalamazoo dealerships sold in an average month before they were terminated, Zeigler says.

But for Krone, business has been slower than she expected, which she attributes to Chrysler's two-year absence there.

"People had two years to establish relationships with other dealers, and they were pretty heavily courted to do so," Krone says. "I'm not sure how long it's going to take for people to know we're here."

You can reach Nick Bunkley at nbunkley@crain.com. -- Follow Nick on

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