Chrysler Dealers to Face Difficult Battle

The move by Chrysler LLC to eliminate about a quarter of its dealerships through a bankruptcy-court filing is running into opposition from lawmakers and franchise owners, but the objections are unlikely to derail the company's efforts to put dealers out of business in the coming weeks.

A number of members of Congress voiced concern midweek over the closures.

Wednesday, Sen. John D. Rockefeller IV (D., W. Va.), wrote to Chrysler, General Motors Corp. and the Treasury Department, saying the time frame for dealership closures in Chrysler's case is "egregious." Sen. Kay Bailey Hutchinson (R., Texas), introduced a proposal Thursday to give dealers at least 60 days before they shut down, instead of the 30 or so planned by Chrysler.

As part of its reorganization in bankruptcy court, Chrysler last week named 789 dealers that it wants to drop from its network of about 3,200 stores. It told the court it wants those dealers to stop selling its cars and trucks by about June 9.

GM said it plans to get rid of roughly 1,100 dealers, a move that suggests the auto maker is likely to file for bankruptcy-court protection on or after June 1.

So far, two groups representing about 350 dealers have filed objections to Chrysler's move.

A Chrysler executive on Thursday defended the auto maker's decision, arguing that if the company didn't sell most of its assets to Fiat SpA as planned, all of its remaining dealers would go out of business. "The auto industry cannot support the number of dealers in the marketplace," said Steven J. Landry, Chrysler's marketing chief.

Legal experts said Chrysler dealers face an uphill battle because bankruptcy laws generally give courts wide latitude to tear up contracts such as dealer licenses. As a result, many dealers are choosing not to join the battle against Chrysler in bankruptcy court, concluding the legal costs would be high and the chances of winning slim.

"The dealers I've spoken to...don't think it's worth their time," said Scott Silverman of McCarter & English LLP in Boston. Just weeks ago, he said, he expected a handful of dealers to hire him to fight for their survival. "The few dealers that we are working with right now aren't even sure they want to be saved," Mr. Silverman said.

Mr. Silverman and other attorneys working with dealers said many of their clients are focusing on landing other franchises or selling or making some other use of the land where their stores are located.

Bob Archer owns three Chrysler franchises in metropolitan Houston that are supposed to close, and his brother Jim Archer Jr. owns a fourth, which is also on the closures list. But while Bob Archer is among the dealers who are objecting to Chrysler's move, his brother has decided not to fight in court.

Jim Archer said that if the other dealers prevail in bankruptcy court, he would benefit from the ruling even if he isn't actively involved. Jim Archer's dealership once employed 80 people, but now he is down to just four staffers, along with $8 million in vehicles in his inventory.