Chrysler may need another round of dealer cuts even after terminating about 25 percent of its U.S. dealerships, as sales continue to slide amid a dearth of new products, an analyst said on Tuesday.
Chrysler severed ties to nearly 800 U.S. showrooms in June as part of its government-financed bankruptcy restructuring under which most of the company's assets were sold to a group led by Italy's Fiat.
However, the remaining 2,400 dealerships may still be more than Chrysler needs with its market share expected to decline to as low as 6 percent in the next two years -- from 11 percent in 2008, said Sean McAlinden, chief economist at the Center for Automotive Research.
"If its market share drops to like 6 percent in the next two years, that's a 40 percent drop in market share and they only dropped their dealerships by 25 percent," McAlinden told reporters at an industry briefing.
Chrysler's U.S. sales fell 38 percent through November, when overall industry sales are down 24 percent. Its market share is down to 9 percent, from 11 percent in 2008.
The continued slide in sales and market share also suggests that the No. 3 U.S. automaker may need to revise the aggressive five-year revival plan it unveiled last month, McAlinden said.
Chrysler spokeswoman Kathy Graham said the automaker's retail network is sized appropriately after the restructuring and it remains confident of implementing the turnaround plan.
McAlinden said General Motors Co , which is terminating franchise agreements with 40 percent of its dealerships through next year, is in a better shape than Chrysler because its sales are not expected to fall by that much. GM saw a 32 percent decline in U.S. sales through November.
Congress on Sunday passed a $447 billion bill under which terminated GM and Chrysler dealerships would be given a way to try to maintain their affiliations with the automakers.
Chrysler Chief Executive Sergio Marchionne, who also heads Fiat, presented a five-year revival plan for Chrysler last month, which hinges on a range of upbeat assumptions such as a recovery in U.S. market share to over 13 percent in 2014.
Full story
