Chrysler Corp. has blocked some smaller dealerships in the state from accessing its used-car auctions, raising fears that it may drop underperforming dealers entirely.
“You have to hit certain volumes, or you can’t go to the Chrysler auction,” said Larry Miles, owner of Big Valley Ford Chrysler Dodge in La Junta. “They have banned 460 dealers already. I was in that group.”
Car dealers who depend heavily on used-car sales are especially vulnerable to the bans that began earlier this month.
“If you are trying to stock your used-car lot, you need to be able to purchase at auction,” said Tom Kontos, chief economist with Adesa, an Indiana firm that tracks the used-car market. “Not being able to participate in auctions would be a key limitation.”
Miles said he penned a letter to Chrysler asking how the company expects people in a drought-stricken community where incomes average $18,000 a year to afford new cars costing $30,000 or more.
He said he plans to fight Chrysler if they send him a letter similar to one that threatened several Michigan-area dealers with franchise termination if they didn’t beef up sales.
“This is my livelihood, and my life on the line. It is not my fault that the economy went sour and bad,” he said.
Chrysler also cut off Stone Motors Inc. in Julesburg from its closed auctions. Owner Butch Stone said he isn’t waiting around to be dropped.
“I am in the process of terminating my franchise with Chrysler,” Stone said. “We have decided to stay with Ford.”
Stone estimates that 90 percent of his business is in used vehicles, which are more affordable to his customers.
Neither Chrysler Corp. nor Chrysler’s Denver office returned calls seeking comment.
The loss of market share to foreign brands has pressured domestic manufacturers to trim the large dealership networks they built decades ago, said Tim Jackson, president of the Colorado Automobile Dealers Association.
Chrysler has about 3,700 dealers and a 14 percent share of the U.S. market. Toyota commands a larger 16 percent share of the U.S. market using only 1,400 dealers.
If Chrysler eventually dropped him as a dealer, Miles said his customers would need to drive more than 60 miles for service in Pueblo.
Rural communities will lose a major source of tax revenues, not to mention jobs, if dealers are forced to close, Stone said.
Colorado franchise laws offer car dealers little protection, Jackson said. His hope is that manufacturers will provide dealers with adequate compensation in the event that they are dropped.
“What generally has happened is that the manufacturer puts some money into the deal to buy a dealer out of a location,” he said.
Jackson said he doesn’t expect dealerships in the metro area to feel much impact, nor should dealerships in areas with a strong economy, such as Grand Junction.
Compared with Eastern states, Colorado doesn’t have as heavy a concentration of new-car dealerships, he said, which should allow state dealerships to fare better.
Staff writer Aldo Svaldi can be reached at 303-954-1410 or asvaldi@denverpost.com.
