Chrysler announces major dealership closings

Chrysler filed a motion in bankruptcy court saying that it plans to eliminate the dealerships as early as June 9. This morning, dealerships were supposed to receive notice as to whether or not they were among the 789 dealerships that were to be eliminated.

Dealers that do receive the bad news that they are part of the group being eliminated will be able to appeal the decision, and Chrysler still has to wait until a June 3 hearing to learn if the U.S. Bankruptcy Court in New York approves its motion.

While it is never good to hear about dealerships closing, and people losing their jobs, for Chrysler this move seems to be inevitable. Its dealerships have just not been able to stay competitive with its foreign competitors. In 2008, Chrysler dealerships sold, on average, 303 vehicles per day. Compare that with its overseas competitors Honda (NYSE: HMC) whose dealerships sold 1,200 vehicles on average, and Toyota (NYSE: TM) which saw 1,300 vehicles sold per dealer.

In defense of its decision to close so many dealerships, Chrysler stated that 90% of all sales are coming from slightly above 50% of its dealerships, so it would be difficult to argue against its decision to eliminate those that are not pulling their weight in sales.

What are your thoughts on today's announcement? Should these dealership closings help the company, or do you think that Chrysler should hold off on these closings until the market starts to turn around?