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May 14th, 2009
Original Nash dealership on Chrysler chopping block

STAFF REPORT

Chuck Nash Jeep Eagle, the original Nash automobile dealership that started in 1976, is among 789 locations on the Chrysler LLC chopping block as the automaker tries to restructure in bankruptcy.

Chrysler told a New York bankruptcy court Thursday that it wants to shed about one-fourth of its 3,200 dealerships by June 9, arguing that just more than 50 percent of its dealerships account for 90 percent of its U.S. auto sales.

Dealers were told by the company Thursday if they would be eliminated or saved.

A woman answering the telephone at the Nash dealership on US 123 and Interstate-35 said the company had no comment. Nash could not be reached for comment.

A New York bankruptcy judge is scheduled for a June 3 decision as to whether or not it will approve Chrysler’s motion.

Chrysler reportedly told the bankruptcy court that more than half of the dealerships being eliminated sell fewer than 100 vehicles per year. The company added that it needs to consolidate its dealerships to be more competitive. For example, the Chrysler filing reportedly said its average dealership sold 303 vehicles in 2008, compared with about 1,200 per Honda dealership and nearly 1,300 per Toyota dealership.

Chrysler has operated under bankruptcy protection since April 30. The company, which has received $4 billion in federal loans, is down 46 percent in sales for the first four months of this year compared with 2008, when the company reported a $16.8 billion net loss.

Nash opened the SH 123 location in 1976, when he “broke off” from the family auto dealership. Nash’s grandfather, John Nash, opened Capital Chevrolet in Austin in 1926.

Last November, Nash opened a new GMC dealership with 42,700 square feet under roof just south of Yarrington Road on Interstate-35. As Nash cut the ribbon, General Motors was asking the federal government for help. But Nash remained optimistic.

“Don’t forget, when you’re reading about everything and hearing about everything, this is Texas and Texas is special, especially between Austin and San Antonio,” Nash said as he stood behind the uncut ribbon.

General Motors is reportedly telling 1,100 dealers this week that it will not renew their franchises when they expire at the end of September 2010.

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0 thoughts on “Original Nash dealership on Chrysler chopping block

  1. Forgive me for not being an expert in how dealerships work, but this doesn’t make sense to me. I assume the dealership is owned by Mr. Nash and he pays a fee and buys cars directly from Chrysler at some price above cost; I don’t see how it benifits the national company to back out of a thousand contracts.

  2. My understanding is that the dealership doesn’t actually purchase the inventory from the automaker – they “borrow” it and when a car sells, everyone gets a cut of the profit.

    If a dealership isn’t selling any cars, then the parent company would almost certainly incur carrying costs for that inventory. Following that logic (if I’m right) it makes sense to me that Chrysler would want to pull its inventory back from the non-producing outlets and reallocate it to the more productive ones.

  3. Sadly, it is not uncommon in industries with Suppliers & Dealers to do “tail management”. There is an administrative cost to the Supplier to support a large number of low volume Dealers. Think of all the accounting, marketing, distribution, and customer service people you need to support a dealer network. It can be a numbers game. The Supplier looks at the marginal productivity of their low volume sites, and decide to “cut the tail” at a point that let’s them eliminate administrative costs. By applying the “law of retail gravitation”, the theory is that part of the lost volume will be picked up by the bigger sites.

  4. Let’s not panic just yet. Chrysler would be crazy to cut a thirty-year partner, when it is clear right down the road that the dealer is even more heavily-invested in the car business. If they do not “dance with the one that brung em” they do not deserve to make it out. It would be better for all of us in this country if they make it.

  5. Yes, I suppose that makes sense. I would think that much of the marketing/distribution and a good bit of customer service would be done by the dealership (Nash may stop advertising in the area but I doubt Chrysler will) and that whatever administrative costs Chryster incurs would be on a per-sale rather than a per-dealership basis.

    The contracts expire in October of next year; perhaps by then the situation will have changed. We can only hope.

  6. Griffin, one of the “advantages” of bankruptcy is that contracts can be voided and thus it doesn’t matter if Nash’s contract runs thru October of this year or next or whenever. The bankruptcy court can end it now. Also, other news media have reported {in error} that this all raises a conflict between state law {the dealer contracts} and bankruptcy law. For those who remember 12th grade civics class: federal law supercedes state law.
    The bankruptcy court can allow chrysler to close all those dealers as early as June 9th this year if the judge chooses to…period. Too bad for Nash, great guy and community leader, and really too bad for his employees!! Wish it had been the other chrysler dealer in town who got shut down.

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