DETROIT — Chrysler LLC has a potent new weapon to thin its dealership roster: Bankruptcy Court.
In a move that rocked dealers last week, the company filed for Chapter 11 reorganization in U.S. Bankruptcy Court for the Southern District of New York.
Then a top Chrysler executive announced that the company will eliminate dealerships.
"We don't have the volume and revenue to support the dealer body we have," co-President Jim Press said last week during a telecast to dealers.
Bankruptcy Judge Arthur Gonzalez has the authority to tear up contracts and sidestep legal requirements — such as state franchise laws — that dealers traditionally use to protect their franchises.
Surprisingly, pressure to cut dealerships is coming from the U.S. Treasury. In a teleconference with dealers Thursday, April 30, Press said Chrysler wants most dealers to carry all three brands — Jeep, Dodge and Chrysler — under one roof.
He also said the Chrysler that emerges from bankruptcy would have fewer dealerships. But Press did not reveal how many dealerships Chrysler wants to retain.
"We've just started through the process, and we're doing a good surgical evaluation," Press said. "We're committed to not including a substantial number of dealerships."
Chrysler already has been consolidating dealerships under a plan called Project Genesis, launched last year. As of March 31, 1,993 of its 3,215 dealerships carried all three brands.