A nervous day for area Chrysler dealers

The independent businessmen who run the region's Chrysler dealerships were sent into an adrenaline- fueled state of anxiety yesterday when President Obama declared that the Big Three automaker would file for Chapter 11 bankruptcy.

For the 190 Chrysler, Jeep, and Dodge dealers across the Philadelphia area, the news provoked a flurry of calls and conversations, worries and hopes.

"My phone's been off the hook all day," said David Kelleher, a local Dodge dealer who is active nationally with Chrysler's lobbying efforts in addition to owning showrooms in Glen Mills and Philadelphia. "A lot of people are calling me, saying: 'What do you think's going to happen?' "

"They're scared," Kelleher said. "They want to know if I know anything."

The plan presented yesterday, which officials said could bring Chrysler Corp. out of bankruptcy within two months as a stronger company, contained no details about whether dealership reductions would be part of the reorganization.

Given that steep dealership reductions were recently announced as part of General Motors Corp.'s efforts to avert bankruptcy, Chrysler dealers were nervous about what may lie ahead for their franchises, whose contracts with manufacturers are protected by state laws.

"When you're in bankruptcy," Kelleher said, "franchise laws can be thrown out by the bankruptcy courts, and the franchise can be immediately terminated without any due diligence."

Under the plan, Chrysler would enter an alliance with Italian automaker Fiat S.p.A., whose subcompact cars could hit U.S. showrooms in the next two years, something Chrysler would have been unable to do on its own.

But for local dealers, such hopes were tempered by the unknowns. For example, some were concerned whether Chrysler would pay them for outstanding debts. Kelleher said a typical dealer could be owed $250,000 by the manufacturer in the form of rebates and other obligations that dealers pay for before being reimbursed by Chrysler.

In a bankruptcy situation, dealers would conceivably have to wait in line for payment, if they received it at all, Kelleher said. In a worst case, he added, failure to receive payment could knock some dealers out of business.

"Chrysler owes me $49,000 on Monday," said Kelleher, who described bankruptcy as bringing good and bad news. "I'll feel a lot better when that $49,000 shows up in my account Monday morning."

Kevin Mazzucola, executive director of the Automobile Dealers Association of Greater Philadelphia, said he expected such matters to be sorted out by a bankruptcy judge - with an order, he hoped, authorizing Chrysler to make good on such payments.

On the broader issue of dealer closures, Mazzucola said the company's plans remained unknown. It would make no sense from a sales standpoint to trim the dealer count, he said, because dealers sell cars. And Chrysler needs to sell cars.

But if dealers fail to convince a bankruptcy judge that Chrysler must make good on what they are owed, Mazzucola said, it could have a profound effect on their survival.

"Chrysler is going to need dealers," he said. "If they're not going to pay what the receivables are, you're going to have a lot of dealers that are not going to be doing well.

The National Automobile Dealers Association echoed similar concerns about the health of dealers in the months ahead. The group said yesterday that bankruptcy "must not be used to drastically reduce dealer numbers. Dealers generate more than 90 percent of manufacturer revenue and are not a cost to the automaker."

Mazzucola, whose local group has been busy for months with worsening auto-industry woes, said he and his staff reported to work expecting an intense day, talking to dealers and lawyers and hopping onto back-to-back conference calls.

He had caught whispers of potential bankruptcy at 12:01 a.m. yesterday, so he went to the office appropriately dressed for an arduous day.

"I'm not in a tie today," he said, before jumping onto yet another conference call. "I'm in a pair of sweats."