Detroit automakers want fewer dealerships

Image: Kevin Beltz
Kevin Beltz, owner of Gene Beltz Shadeland Dodge, stands in front of his Indianapolis dealership on March 12, 2008. The new owners of Chrysler LLC want to jettison hundreds of single-brand dealers, consolidating them into larger operations that sell all three company brands: Chrysler, Dodge and Jeep.Michael Conroy / AP
/ Source: The Associated Press

For years, the Warren Central High School Warriors have counted on Gene Beltz's Shadeland Dodge for support.

From buying ad space in programs to paying for schedule printing to sponsoring a mentorship program, the dealership has been there to support athletics and academics at the football powerhouse on Indianapolis' east side.

But the new owners of Chrysler LLC want to jettison hundreds of single-brand dealers like Shadeland, consolidating them into larger operations that sell all three company brands, Chrysler, Dodge and Jeep.

The plan, similar to those under way at Ford Motor Co. and General Motors Corp., could mean an exit from the business for Shadeland and other longtime dealerships that have long been part of the American landscape.

"I'm kind of a dinosaur," says owner Kevin Beltz, whose father started the business in 1970 when the area was a bustling hub of factories.

Beltz doesn't want to sell. He'd rather buy the Chrysler-Jeep dealership down Shadeland Avenue, but he knows that dealer would like to buy him.

"When you're a family-owned store and you own your own property and this is your livelihood, what are you going to do?" he asks.

Fighting for the same customers
Chrysler now has roughly 3,600 dealer sites nationwide, many close together and fighting for the same customers. Merging them could leave nicer and better staffed franchises that would be more profitable. There still will be plenty of competition between dealers, from other automakers, and on the Internet, say companies and industry experts.

There's been talk about cutting the number dealers in half, but Chrysler won't say if it has a target in mind.

Whatever the goal, Doug Seagrave, athletic director at Warren Central, is hoping Chrysler doesn't meet it in his neighborhood. He's on a first-name basis with Beltz, who for years has funded a program that prints and distributes posters of high school athletes who set examples for younger kids.

"We've developed a relationship with Kevin," Seagrave said. "It's certainly been beneficial for us."

Seagrave equated consolidating car dealers to the banking industry, in which many local businesses were bought up by far-off corporations.

"They're just so big now, you don't even know who to get a hold of," Seagrave said. "You lose that local flavor and the person that you know and deal with."

Detroit automakers built their dealer networks when they had a far larger share of the U.S. market. In 1984, the Detroit Three sold 77.4 percent of all cars and trucks in the U.S., but that dropped to just 51.1 percent last year, according to Autodata Corp.

During that time, the dealer network contracted only a little, so stores began to scrap with nearby dealers selling their own brands — especially those in cities and interior suburbs.

"We're just over-dealered," said longtime Detroit-area dealer Hoot McInerney, whose Dodge-only shop will be merged into his nearby Chrysler-Jeep dealership.

Steven Landry, Chrysler executive vice president of North American sales, said Chrysler dealers are generally seven to nine miles apart in metro areas, too close to be profitable.

Focus on metropolitan dealers
Chrysler has said small, rural dealers won't be targeted. Most carry all three brands, have high customer satisfaction and are community pillars, said Gary Dilts, a former Chrysler sales executive who now heads J.D. Power & Associates' automotive group.

"They're really trying to stop this internecine warfare among metropolitan dealers five, 10 miles apart," said Sheldon Sandler, managing director of Bel Air Partners, a Princeton, N.J., firm that helps car dealers find options when they want out of the business.

Toyota Motor Corp., for example, had about 1,400 U.S. dealerships last year, about 40 percent of the combined number selling Chryslers, Dodges and Jeeps.

Toyota dealers each sold an average of 1,766 vehicles last year, while the average Dodge dealer sold only 374, according to J.D. Power and the trade publication Automotive News.

Because of declining market share, many Detroit Three dealers are losing money. Last year, 28.6 percent of Chrysler, Ford and GM dealers broke even or lost money, according to the National Automobile Dealers Association. The compares with only 14.5 percent of foreign-car dealers.

But even so, dealers will fight until the end to keep their family businesses, said Sandler.

Brian Campbell, who runs a family-owned Dodge dealership in the Detroit suburb of Redford Township, said dealers are curious about what Chrysler has planned.

"Maybe there's a little worry involved," he conceded.

Campbell's father, Bruce, started the dealership a quarter-century ago in the blue-collar community that sits between Detroit and more affluent suburbs to the north and west. For years, they have sponsored youth sports teams and have been active in the chamber of commerce.

If they are merged into another dealership, the community would lose, said Mary Jo Mullen, the chamber's executive director. For years, the Campbells have provided the car that's the prize for making a hole-in-one at the chamber golf tournament, an important annual fundraiser.

"It would definitely be an impact on the chamber," Mullen said. "Their sponsorship has been valuable to us."

Cutting lineup in half
Chrysler's plan, though, is to push the consolidation by cutting the roughly 30-model Jeep, Dodge and Chrysler lineup by up to half in four or five years. The Chrysler brand likely would sell cars and the company's only minivan, while Dodge would be more truck-oriented and Jeep would get sport utility vehicles.

"If you're a stand-alone Dodge dealer today, even though you agree with the concept, you're probably feeling a little queasy," said Chrysler's Landry.

But as Chrysler works with dealers to consolidate, Landry sees more dropping opposition. Chrysler hopes to become a smaller, leaner company with dealers who make a lot of money.

Landry says the community service performed by dealerships that are merged likely will be filled by dealers started by competitors.

"There's just different players," he said. "I think people are still givers."

Dilts said the customer ultimately will benefit.

"I think the customer wins here big time," he said. "It's very difficult to take care of customers while you're losing money."