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These cars must go: Chrysler dealer cuts mean bargains

Dealers who were cut under a lot of pressure to sell inventory by June 9.

TOM KRISHER AP Auto Writer

DETROIT — At 789 Chrysler lots across America sit 44,000 potential bargains, cars and trucks that are stuck between shellshocked dealers and a troubled company that no longer wants their services.

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FILE - In this May 14, 2009 file photo, cars are parked at the Terry Morris Chrysler Jeep dealership in Burnt Hills, N.Y. Dealers have just a few weeks to sell the Chryslers, Dodges and Jeeps or risk losing thousands of dollars on them, giving people who want a car on the cheap a serious chance for a deal. (AP Photo/Mike Groll, file)

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The dealers have only until June 9 to sell the Chryslers, Dodges and Jeeps or risk losing thousands of dollars on them, giving people who want a car on the cheap a serious chance for a deal.

On Thursday, Chrysler LLC asked a New York bankruptcy court to end its franchise agreements with the dealers, casting them aside so the automaker can move forward as a new company with a leaner network of about 2,400 showrooms.

“They’ve told us that the inventory is our problem,” said Keith Hollern, one of the owners of a Dodge dealer in Windber, Pa. “Want to buy one? We’re having a fire sale.”

Dealers borrow money to buy their inventories, then repay the loans and make a profit when the vehicles are sold. But Chrysler sales were down 46 percent the first four months of the year, so many dealers have been paying interest for months. Even if the vehicles are sold at cost, dealers still lose thousands in interest payments.

Chrysler doesn’t have the money to buy back the vehicles, said company spokeswoman Kathy Graham, but it also doesn’t want to leave dealers in a bind or see the inventory flood the market at bargain prices.

So it has signed a deal with GMAC Financial Services, Chrysler’s new finance company, to float loans to dealers that Chrysler plans to keep so they can take on the 789 dealers’ unsold inventory. The deal, though, doesn’t include about 4,000 2008 models still on the lots.

Remaining dealers likely will need to take the cars and trucks because all of Chrysler’s manufacturing plants have been shut down since it entered bankruptcy on April 30, Graham said. Sales in May have been stronger than anticipated, so dealers will need to replenish inventories, she said.

Graham said dealers to be cut from the company will get Chrysler warranty reimbursement and sales incentives such as rebates and low-interest financing until June 9. But after that, they won’t be reimbursed for either.

That means the dealers have a big reason to get rid of the cars before their franchise agreements end. Incentives on some vehicles can run $6,000 or more, and without them, dealers who have been cut won’t be competitive with remaining dealers who can still offer the discounts.