Targeted Chrysler dealers in a race to the end

updated 6:19 p.m. ET June 8, 2009

NEW YORK - Hundreds of Chrysler dealers across the U.S. on the automaker's "hit list" are scrambling to dispose of their inventory by Tuesday when their franchise agreements are slated to be terminated.

Auburn Hills, Michigan-based Chrysler has asked a bankruptcy court for permission to terminate the franchise agreements of 789 dealers, about 25 percent of the total. Chrysler needs to cut costs, and claims current sales levels do not justify a network of 3,189 dealers.

For those facing termination, the last days of selling Dodge, Jeep and Chrysler vehicles have been filled with quick sales at deep discounts, along with sad goodbyes from longtime customers and feelings of dismay and anger toward the automaker they worked with for years.

"It is what it is. It's just a tough situation," said Peter J. Walsh, owner of Walsh Dodge in Jersey City, New Jersey, speaking inside his dealership Saturday morning. "It's been difficult mentally the past couple of months, but we'll be OK. I don't feel as bad for myself as I do for the young guys with families that work for me."

Walsh started out selling used cars in his hometown 28 years ago after the birth of his daughter. He slowly built his business, and felt as if he had finally made it when he earned his Chrysler shingle in 2000.

Chrysler maintains that the franchises singled out for termination were chosen because they were not profitable, did not have all of the automaker's three brands under one roof, or were located too close to another Chrysler dealer.

But the dealers argued in court that a smaller dealer base won't save the company any substantial money. They say the dealers cover their own costs, paying for everything from the vehicles on their lots to employees, advertising and tools.

Walsh said that while Chrysler's products were good, its dealer support was always poor — too focused on the automaker's own short-term needs.

And while he might have been underperforming some of Chrysler's sales criteria, Walsh claims some of that was the automaker's fault, pointing to its insistence that he sell more pickup trucks — a vehicle unsuited to the densely populated urban strip he serves across the Hudson River from New York City.

"How many Dodge pickups can I sell in Jersey City? It's not Waco, Texas," Walsh said.

A court hearing that began Thursday in New York with testimony from over a dozen dealers is scheduled to continue with legal arguments on Tuesday. U.S. Judge Arthur Gonzalez is expected to rule after the arguments conclude.

Steven Landry, Chrysler's executive vice president of North American sales, said Tuesday's deadline remains fixed. Dealers can sell the vehicles after that date, but they won't be able to offer Chrysler sales incentives, making it tough for them to compete.

"We won't be changing any dealers on the list. We won't be changing the date," he said.

Landry said Chrysler had commitments for the inventory of 42,000 vehicles on the lots of the affected dealers. Dealers have sold 16,000 vehicles to customers since the May 14 announcement and Landry said the remaining 26,000 cars and trucks would be purchased by remaining dealers.

Chuck Eddy, a Youngstown, Ohio, dealer who was among those chosen to remain with Chrysler, said dealers have quickly bought up the inventory of those going out of business and are preparing for the transition.

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