Chrysler to cut models and dealerships

By David Bailey and Ben Klayman

CHICAGO/DETROIT (Reuters) - U.S. automaker Chrysler LLC plans to shrink its dealer network and cut some vehicles that compete with its each other for customers to become a smaller, profitable company, an executive said on Friday.

The dealer consolidation is part of a plan to sell all three of its brands under one roof.

Chrysler President Jim Press would not say just how deep the cuts might be for the automaker, which previously said it would cut a few slow-selling models.

Chrysler's dealer and vehicle model lineup is big enough to support production of 4 million vehicles per year, but it has retail sales of about 1.5 million and needs to be sized to sell about 2.5 million, Press said.

"The product portfolio has to consolidate," Press said at a J.D. Power and Associates meeting in San Francisco. "We don't know how many models we're going to have. Nobody knows that."

Chrysler has some 3,600 dealers and builds more than 30 models of cars, minivans and trucks, some of which compete more with each other than other automakers, Press said. Eliminating duplicate vehicles would give Chrysler money to spend in creating vehicles to compete in more categories, he said.

Chrysler has moved quickly since its acquisition by Cerberus Capital Management last summer to address an unfocused vehicle lineup and to answer customer complaints ranging from materials, interiors, noise and vibration.

About 55 percent of its dealers now carry all three of its Chrysler, Jeep and Dodge brands. The plan is aimed mainly at city and suburban dealers that do not carry all three brands to consolidate into larger sustainable dealerships.

Currently, a dealership might carry one or two of the brands, but not necessarily all three at the same location. To be effective at current sales volumes, all three brands need to be under the same roof, Press said.

Chrysler expects to keep all of its brands, but the plan to eliminate duplicate vehicles among the brands, producing one minivan instead of both the Chrysler Town & Country and the Dodge Caravan for example, would spur dealer consolidation, Press said.

"We do know that if all three brands are not under one roof, the dealer will not have the opportunity to sell the full array of products and profit from it," Press said.

Press said the process could take three to five years and would be much harder for dealers if the consolidation doesn't occur before the products begin to go away. The new product portfolio could roll out over four to six years.

Chrysler will discuss details on real estate and other issues with dealers in each market, he said. Chrysler will not offer huge financial incentives to dealers, he added.

Press noted that U.S.-based automakers had 75 percent of the dealers, with only a 48 percent share of the market.

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