June 3, 2009 – Both General Motors and Chrysler have announced that they are effectively closing nearly a total of 2,000 dealerships across the country by not renewing their franchising contracts. In the wake of the announcement, millions of vehicle owners are concerned about what this means to them and Better Business Bureau is providing answers to some frequently asked questions about dealer closings.
After filing for Chapter 11 bankruptcy protection, Chrysler announced that it will terminate 798 franchise agreements with dealers across the U.S. in June 2009. This amounts to about 25 percent of Chrysler dealers and affects approximately four million customers who bought or serviced their cars. General Motors has also announced that they will not renew agreements with 1,100 dealers in the U.S. and 300 of the 700 GM dealers in Canada.
Millions of GM and Chrysler customers will be affected by dealer closings and minimizing the amount of confusion is important, said Steve Cox, BBB spokesperson. In some cases, owners will have to drive a little farther to get their vehicle serviced if their dealer shuts down; however, there can be larger issues consumers need to be aware of, including the potential for getting stuck with the payment for the vehicle they traded in. BBB offers answers to the following frequently asked questions from vehicle owners regarding the recent Chrysler and GM dealer closings:
How did Chrysler and GM decide which dealers to close? GM and Chrysler have indicated that the reason for closing specific dealers was a matter of customer satisfaction, sales performance and market over saturation. GM has stated that about half of the dealers not being renewed only sold 35 cars per dealership in all of 2008. Similarly, Chrysler has stated that half of the closing dealerships sold less than 100 vehicles. When compared to other manufacturers, GM and Chrysler will still have a large number of dealers. GM is aiming to have 3,600 dealers by 2,010 and Chrysler will have 2,411, compared to the current 1,304 Honda dealers and 1,470 Toyota dealers in the US.
When will the affected dealers close their doors? The affected Chrysler dealers will not have their franchise agreements renewed effective June 9, 2009. GM is planning to cut their number of dealers to 3,600 by 2010; already, 1,100 dealers have received letters notifying them that GM will not renew their agreement and most affected dealers will see their contract expire in October of 2010.
Where can I find out which dealers are closing? Chrysler has made their list of dealer closings public. An easy to navigate list is available on the Wall Street Journal’s web site. GM has not released an official list of dealers yet; however, some dealers are already receiving the bad news and reporting it to local media.
Will my warranty or extended warranty be affected? A warranty or extended warranty is offered by the automaker and is not affected by a dealer closing. Both Chrysler and GM have indicated that they are committed to honoring their manufacturer’s warranty despite declaring bankruptcy. Extended auto warranties, such as the protection plans offered by GM, are backed by a separate company which is affiliated with”but not financially tied to ”the company that actually manufactures the vehicles.
How will I know where to take my car for service? Both GM and Chrysler warranties will be honored by any respective certified dealer. Chrysler has stated that the millions of customers who bought their cars from affected dealers will be notified in early June where they can take their autos for service. GM owners can use the dealer finder at www.gm.com/vehicles/dealer to find their closest option.
What if I traded in my car for a new one and the dealer closes its doors without paying off the loan on my trade-in? While a dealer is supposed to pay off the loan on a vehicle they accept for a trade-in, they might not if they go out of business. When this happens the original owner could be liable for making payments on both cars or the lender could go after the person who bought the used car from the dealer. While this is a rare occurrence, it can happen and states such as California have created funds to reimburse such victims.