10 dealers in Utah, including one in Utah County, targeted for closure

Grace Leong

Chuck Barber of Barber Brothers Inc. in Orem thought he had seen it all in his 40-year career selling Chrysler vehicles in Utah.

The veteran auto dealer has witnessed the tumultuous days of gas rationing and skyrocketing gas prices in the wake of the 1973 oil crisis and survived a dramatic slowdown in sales in the aftermath of the Sept. 11, 2001 terrorist attacks and record-setting $4 a gallon gas last year.

That is, until Thursday morning when he and 788 other Chrysler, Dodge and Jeep dealers across the nation -- including 10 in Utah -- received an overnight delivery from United Parcel Service notifying them that their dealership agreements with the bankrupt automaker will be terminated on June 9.

The cuts represent about 25 percent of Chrysler LLC's nearly 3,200 dealers.

"Chrysler sent a letter to all the affected dealers with no explanation as to why we are terminated. Just a cold, hard letter that says, 'You're done' after 40 years of business," Barber said, his voice cracking with emotion, in an interview Thursday.

Barber, 60, is a co-founder and partner of Barber Brothers, whose franchises include Chrysler, Dodge, Dodge Truck and Jeep, Chevrolet, and Mitsubishi in Spanish Fork, and Ford in Morgan. At age 20, he began selling Chrysler Plymouth vehicles with his uncle in Salt Lake City and started his own Chrysler Plymouth Dodge and Dodge Truck dealership in Spanish Fork in 1985. He added the Jeep franchise in 2004.

Barber's Chrysler, Dodge, Dodge Truck and Jeep dealership in Spanish Fork are among the 789 dealers nationwide targeted for elimination because many of their sales are too low, Chrysler LLC said in bankruptcy court documents.

Chrysler has asked a bankruptcy court to allow it to reject those dealership agreements in an effort to cut costs, boost profitability with its remaining dealerships and to help complete its pending merger with Fiat SpA. The Italian car maker plans to take an initial 20 percent stake in Chrysler when it emerges from bankruptcy protection.

The beleaguered automaker wants to end its relationships in Utah with Barber Brothers Chrysler Dodge Truck and Jeep in Spanish Fork, Painter Chrysler Dodge Jeep in Nephi, Painters Sun County Chrysler in St. George, Cutrubus Motors Inc. doing business as Rocky Mountain Chrysler Jeep in Ogden, Davis Motors Inc. doing business as Weese Motors in Tremonton, Layton Dodge Inc. doing business as Cutrubus Motors Chrysler Jeep in Layton, Lunt Motor Co. of Cedar City, Parkway Motors of Cedar City, Robert H. Hinckley Inc. of Ogden, and Tri State Motors doing business as Tri-State Motors in Cedar City.

A hearing will be held June 3 in the U.S. Bankruptcy Court Southern District of New York to determine if Chrysler's request will be approved.

Only two Chrysler dealers will be left in Utah County -- Doug Smith Chrysler Dodge Jeep and Brent Brown Chrysler Dodge Jeep -- if Barber Brothers closes its Chrysler dealerships.

"There's no rhyme or reason as to what they've done," Barber said. "It's enough to make you furious because they've terminated dealers who've been in business for 20 to 30 years or even longer. Some of the dealers were very good reputable solvent dealers and they just arbitrarily terminated them."

"What angers me most is that there are so many customers that will be affected by this. And when those 800-plus dealers close their doors, that's going to be several thousands of people without a job," he said.

Impact of closures

According to the New Car Dealers of Utah, Chrysler's move, which the dealers can appeal, is likely to have a devastating effect in cities and towns across the nation as thousands of jobs are lost and taxes are not paid.

As many as 400 jobs in Utah could be lost if the 10 Chrysler dealerships are closed, said Craig Bickmore, the group's executive director. There are a total of 150 auto dealers in Utah. The retail auto industry in Utah accounted for $5.3 billion, or 12.6 percent of the state's total taxable sales of $41.9 billion in 2008, according to the Utah Taxpayers Association.

Barber couldn't immediately specify his plans for his company's 120-plus workers. "It's too early to tell, and many of the workers have multiple responsibilities for several franchise brands," he said.

He said the company's viability isn't affected by the cuts, and that it will focus on building its remaining auto franchises -- Chevrolet, Mitsubishi and Ford. He also owns farm equipment franchises, Montana Tractors and TYN Tractors, in Spanish Fork, and Aprilia, Vespa and Moto Guzzi motorcycle franchises in Orem.

"It'll hurt. It'll decrease our sales, and profitability to a degree. But it won't affect our viability. We'll continue to sell cars, do service," he said.

Eliminating dealerships will also take away the charitable donations and sponsorships that dealers bring to their communities, Barber said.

The company has been a major sponsor of Fiesta Days Rodeo in Spanish Fork and other community events for several years. "But that could be going away," he said. Even if he was forced to close the Chrysler, Dodge, Dodge Truck and Jeep dealerships in Spanish Fork, he believes the recent relocation of his Mitsubishi franchise from Orem to Spanish Fork will help mitigate the loss.

Why Chrysler made cuts

Chrysler's dealers are facing "unprecedented financial challenges in the current economic environment, and further strain" as a result of Chrysler's bankruptcy, according to court filings.

Chrysler said that it evaluated dealerships on a laundry list of criteria including raw sales volume, location, type of market, history of experience and market share. According to the filings, the affected dealerships "lack the operational, market, facility and linemaker characteristics necessary to best contribute to the ongoing dealer network under current or future ownership."

Chrysler said in court filings the affected dealers are not competitive enough with foreign brands. Chrysler sold an average of 303 vehicles per dealer in 2008, according to its filing. By contrast, Honda Motor Co. sold about 1,200 vehicles per dealer, while Toyota Motor Corp. sold nearly 1,300 per dealer.

Chrysler said its dealer network "needs to be reduced and reconfigured in a targeted manner to strengthen the network and dealer profitability and to achieve optimal results for the dealers and consumers."

Chrysler has received $4 billion in federal loans and has been operating in Chapter 11 bankruptcy protection since April 30. Its sales this year are down 46 percent compared with the first four months of last year and it reported a $16.8 billion net loss for 2008.

Dealers fighting back

But the affected dealers aren't going down without a fight. Some questioned the methodology used by Chrysler and Fiat in their decision, and have vowed to fight the planned cuts.

"There's a major effort going on with a law firm hired by the National Automobile Dealers Association to represent the dealers including Barber Brothers. We don't have full details yet because this is so new," Barber said.

Chrysler said all of its dealer contracts allow the company to terminate its relationship for any reason with 30-days written notice.

Stephen Wade, a dealer on the national auto dealers' executive committee, said he met Wednesday with Sen. Orrin Hatch, R-Utah, to seek a reduction in the planned cuts and to find a way to slow them down.

"The list is too fast, too much, too deep, and implemented too quickly," said Wade, who is from St. George. "We're trying to make it as soft a landing as possible for the affected dealers."

Describing the Chrysler list as "disheartening" to the Utah auto industry, Bickmore holds out hope that the list isn't final.

"We are lobbying members of the Utah delegation to approach the Obama auto task force to not do this. This is not the way to restructure GM or Chrysler," he said. "This will affect states, property taxes, sales taxes, jobs. In many communities, dealerships are one of the biggest employers and economic engines."

What's problematic, Bickmore said, is that the planned cuts in Utah represent 40 percent of a total of 24 Chrysler, Dodge and Jeep dealers in Utah.

"Why would you remove 40 percent of your market base to gain market share?" he asked. "Before the economic downturn, they were doing well. They were profitable. The industry as a whole were selling between 16 million and 16.5 million new cars nationwide. Now they're selling around 9 million units. When the economy fell, everyone had to pull back and reduce their expenses."

"Dealers are the manufacturer's customers. They buy the cars and parts, finance warranty services, hire employees, pay for the property, and even the signs in front of their dealerships," he said. "Fewer dealers mean less revenue for the automakers."

Survivors sympathetic

Brent Brown of Brent Brown Auto Groups, which has a Chrysler Dodge Jeep franchise in Provo, is among the 14 surviving Chrysler dealers in Utah.

While Brown is relieved that his dealership escaped the cuts, he said in an e-mailed statement Thursday: "It is so hard to feel fortunate about being spared when so many of your friends and fellow dealers are hurting so badly with the news."

"Of course all the remaining Chrysler dealers will be available to service the needs of the customers who are also being affected by this," he said. "But again, I cannot stress how extremely saddened I am by this unfortunate event and what it means for dealerships which have served their communities so well."

Brown currently owns and operates Ford, Lincoln, Mercury, Chevrolet, Dodge, Chrysler and Jeep dealerships in Provo; a Toyota dealership in Orem, as well as a used vehicle and collision center in Orem.

Chrysler dealerships aren't the only ones targeted for shutdowns this week. General Motors Corp. says it is notifying 1,100 dealers that it will not renew their franchise agreements when they expire at the end of September 2010.

General Motors, which is trying to avoid bankruptcy protection, is also planning to cut dealers. About 1,000 GM dealers may receive letters Friday notifying them of their status. GM is planning to cut about 2,600 of its 6,246 outlets.

• The Associated Press contributed to this report.

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