Anger, sadness as ax falls on Chrysler dealers

By James B. Kelleher and Kyle Peterson

CHICAGO (Reuters) - Dealers across the United States reacted with a mixture of anger and sadness on Thursday to word that bankrupt automaker Chrysler LLC plans to eliminate franchise agreements with them as part of its restructuring efforts.

But most, even those surprised by the news, entertained little hope they could stop Chrysler from following through on the proposed closures, the latest chapter in the decline of a company that was -- for a brief period in the 1990s -- the most profitable car manufacturer in the world.

As a result, the dealers said they were already taking the sad but necessary preliminary steps to close or consolidate businesses that, in many cases, had carried their family names as well as those of the automaker for generations.

"Today is a tough day for a lot of people," said Alex Planas, the general manager of the Tamiami Chrysler Jeep Dodge in Miami, Florida, which employs 100 workers.

Chrysler notified all its dealers on Thursday about its plans to eliminate 25 percent of its retail showrooms and is seeking permission from a U.S. bankruptcy court to terminate franchise agreements.

One Chicago dealer, Stanley Balzekas, characterized the notification as a "screw you" letter because it was "cold and very factual."

The automaker sought approval in a bankruptcy court filing to terminate franchise agreements with 789 of 3,181 dealerships as of June 9.

Chrysler, which filed for bankruptcy on April 30, and larger rival General Motors Corp, have faced pressure to cut struggling dealerships to bring their large sales networks in line with those run by more successful automakers like Toyota Motor Corp which has only 1,200 dealers.

The National Automobile Dealers Association, which represents the country's 20,000 new car dealers, estimated that each Chrysler dealership employs about 48 people on average. That would mean that the cuts by Chrysler could lead to a potential loss of almost 38,000 jobs.

Mark Calisi, 47, who owns Eagle Auto-Mall in Riverhead, New York, says he was "devastated" to learn that his dealership would be closed. He said Chrysler accounts for a third of his business, which also sells Volvo, Mazda and Kia, and that on Thursday he had to sack 30 of his 100 employees.

"I can't even give severance because Chrysler's not taking back my parts," he said.

Calisi, who said he'd just invested $8 million in a new dealership, blamed the federal task force overseeing auto industry restructuring for his plight and said he was weighing his legal options.

"I have been with Chrysler for 13 years and my father was with Chrysler for 30 years," he said. "No matter which way you cut the cake it's devastating."

HARD TIMES

Regina Alexander, service and parts manager of the family-owned Arnold Motor Sales Inc, which has sold Chrysler cars in a little town east of Phoenix, Arizona, since 1971 and employs seven workers, called the news "difficult" but a reflection of the grim economic climate.