Chrysler seeks to drop 789 dealers, one in four

NEW YORK: Chrysler asked a bankruptcy court on Thursday to shut down 789 dealers, or one-fourth of its sales outlets, saying this will cut costs and boost the odds for the success of its alliance with Italy's Fiat.

The troubled auto giant, which is aiming for a quick court restructuring to start fresh under a partnership with Fiat, said the large dealer network compared with its rivals "substantially increases expenses and inefficiencies in the distribution system."

The large number of dealers creates costs for "training, new vehicle allocation personnel, processes, and procedures, oversight" as well as other expenses, Chrysler said in a court filing.

The filing said that Chrysler sold some one million vehicles last year through 3,298 dealers, for an average of 303 per dealer. By contrast, Toyota sold 1.6 million new vehicles in the United States through 1,242 dealers and Honda sold 1.2 million through 1,030 dealers.

"This effort to strengthen the domestic dealer network is a critical component of the proposed Fiat transaction both to improve the viability of the domestic dealer network and position New Chrysler for viability and long-term success," the filing said.

Chrysler, which filed for bankruptcy protection on April 30, said it hopes to wrap up the court process within 30 to 60 days by selling the automaker's main assets to a new entity including Fiat.

The new firm would be majority owned by the United Auto Workers (UAW) union, with small stakes by the US and Canadian governments, which would contribute some 10.5 billion dollars to the venture.

Italian automaker Fiat would initially take a 20 per cent stake in the firm that would rise to 35 per cent and could reach 51 per cent as early as 2013 if Chrysler is able to repay its government loans.