DETROIT -- The Chrysler group says 56 dealers are investing more than $300 million to acquire its franchises.
The acquisitions are a result of Chrysler's effort to woo dealers who own large stores that sell either domestic or import brands.
Chrysler has staged two forums to pitch its franchises to large retailers. Top executives detailed future product, vehicle quality gains and long-term corporate strategy.
"Over 30 dealers who came to those forums have entered into contracts to acquire our franchises," said Mike Manley, Chrysler vice president of dealer relations, in an interview with Automotive News. "The investment is in excess of $300 million."
Another 26 dealers are in the final stages of negotiations, Manley said. Eleven of the 56 retailers are minority dealers, he said.
The acquiring dealers typically are creating so-called Alpha stores. An Alpha store sells Chrysler, Jeep and Dodge vehicles under one roof.
Manley characterized the 56 dealers this way: About half are predominantly import dealers; 30 to 35 percent own large Chrysler group dealerships; and 15 to 20 percent are dealers selling a mix of import and domestic brands.
Chrysler wants to thin its dealer ranks, creating large players in metropolitan markets. The program is voluntary, said Gary Dilts, Chrysler senior vice president of sales. There is no dealership reduction target, he said.
Chrysler's Alpha strategy appeals to those with large dealerships because of the economies of scale created by three-brand stores, Dilts said. And some large dealerships use the increased profits to invest in new stores in better locations, he said.
Chrysler wants its Alpha stores to sell 1,500 to 2,000 new vehicles annually in major markets, Dilts said.
For example, the plan envisions combining two older franchises, each selling about 750 units annually. Combining sales volume and merging operations are more efficient and increase revenue, Dilts said. That paves the way for a newer, larger building or better location, he said.
After attending a Chrysler investment meeting, dealer Herb Chambers bought two Jeep franchises, folding them into an existing Chrysler-Dodge truck store in Millbury, Mass.
"There is additional gross without incurring a great deal more expense," said Chambers, who combined the stores eight months ago. "There are tremendous economies of scale."
Herb Chambers Cos. of Somerville, Mass., ranks No. 14 on the Automotive News list of the top 100 dealership groups in the United States, with retail sales of 37,985 vehicles in 2004. Chambers' franchises include Ford, Saturn, Cadillac, Honda, Toyota, BMW, Lexus, Mercedes-Benz, Infiniti and Porsche.
Dealer Harold Zeigler opened a 4,000-square-foot Chrysler, Jeep and Dodge store in Grandville, Mich., in November.
"It was our No. 1 store in December and in January and is on track to do it in February," he said.
Zeigler is chairman of Harold Zeigler Auto Group in Kalamazoo, Mich. The group has 21 franchises in nine locations. The franchises include Ford, Lincoln, Mercury, Mitsubishi, Suzuki and BMW. The group sells 8,000 to 10,000 new and used vehicles annually.
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