Chrysler’s Closings Penalize Rural Dealers

Of the 789 car dealerships forced to close in Chrysler's bankruptcy, a disproportionate number are rural businesses.

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On Tuesday, Chrysler ended its contracts with nearly a quarter of its car and truck dealers across the country as part of the corporation’s bankruptcy and restructuring. In an analysis of those closings and 2008 U.S. Census estimates, the Daily Yonder has found that the number of rural car dealers who’ve lost their Chrysler franchises is disproportionately high.

According to U.S. Census estimates (2008), 16.5% of Americans live in non-metro communities. But 32.5% of the dealerships losing their Chrysler franchises are non-metro.

Further, the analysis showed that Chrysler’s closings were skewed even more dramatically against the most rural communities of all (those with 10,000 or fewer residents, which the Office of Management and Budget terms “non-core”). Only 6.6% of the U.S. population lives in these most-rural communities, but 19.5%, nearly a fifth, of all the dealers Chrysler chose to close were in these non-core locations (shown in red on the map above).

On June 9, 789 dealers were forced to close nationwide, having been given less than a month’s notice. Chrysler plans to dissolve its old company and reemerge in partnership with Italian car-manufacturer Fiat; company officials argued that shrinking the network of dealers quickly was a requirement for the Fiat deal to move forward.

In hearings June 3, members of the U.S. Senate’s Committee on Commerce, Science, and Transportation challenged the closings, and several questioned Chrysler’s selection process as unfair to rural car dealers.

“What I don’t understand is how the decisions have been made, especially with respect to rural areas,” stated Sen. Byron Dorgan (D-ND).

Sen. Johnny Isakson (R-GA) said that after speaking with constituents, his “number one” question to auto industry leaders about the dealerships was “are they disproportionately being closed in rural areas?”

Daily Yonder
Though Chrysler closed more metro dealerships than rural ones, the rate of closures as a percent of population was significantly higher in micropolitan non-metro communities, and highest in the most rural areas.

The Daily Yonder’s analysis examined the location of closing Chrysler dealerships using RUCA-ZIP Codes, a more detailed unit of analysis than county codes. The RUCA codes take into account population density, urbanization, and commuters to nearby metro-areas. (For more information on the codes, see this link from the University of Washington.)

General Motors also plans to close over a thousand dealerships by October 2010 but has not made public a list of them. Both Chrysler’s and GM’s efforts are being financed in large measure with federal money.

Chrysler president Jim Press, speaking before the Senate Commerce Committee last week, did not specify how dealers were selected for closure. He did say that in the company’s restructuring it would be necessary to bring Dodge, Chrysler and Jeep products “under one roof” and that customer satisfaction and sales performance had been significant considerations.

Governor John Hoeven of North Dakota has called on President Barack Obama to stop the forced closing of Chrysler and GM dealerships, and two freshmen Congressmen Dan Maffei (D- NY 25) and Congressman Frank Kratovil (D- MD 1) have introduced legislation that would require both automakers to honor their contracts.

Yet as these efforts are underway, June 9th has come and gone for 789 Chrysler businesses — rural, suburban, and city. 

“Watching it all,” Sen. Dorgan told the commerce committee, “I’m wondering, who’s making the decisions in this country about who’s too big to fail and who’s too small to matter.”

 

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