The livelihood that Rick Shaub has known his entire life changed in minutes Thursday when he got the call that the Germantown car dealership his family has owned since the end of World War I was one of hundreds to be closed by financially troubled Chrysler LLC in the coming month.
Shaub, who has $2.5 million worth of cars on the lot at Montrose Dodge that Chrysler won't buy back, said he will probably have to file for bankruptcy-law protection, too.
Chrysler said Thursday it was closing 789 of its 3,200 dealerships as it works to restructure in bankruptcy-law protection and merge with Italy's Fiat Group SpA. In Maryland, 15 dealerships would be affected by the closures. Chrysler's bankruptcy filing listed 17 Maryland holding companies, but one of the dealerships was located in Florida and another could not be found at the listed address.
The company, which said the dealerships would close around June 9, thinks it has too many showrooms that are too close together. Closing some would create more profitable and competitive dealerships, the automaker believes. It was also looking to create dealerships that sell all of its brands under one roof.
"A very important element in our restructuring is to assure that our new company emerges from its bankruptcy process with a powerful new dealer body," Jim Press, vice chairman and president of Chrysler, said during a conference call with analysts. "The bankruptcy process allows us a once-in-a-lifetime chance to accomplish a right-sized, realigned dealer body and allows us to address the dealerships with significant performance or satisfaction issues."
But the closings could also leave many owners who have known nothing but the car business in financial ruin and could hit local economies hard as thousands of people are in danger of losing their jobs and sales tax revenues fall if people buy fewer cars. The average car dealer in Maryland employs about 64 people, according to the Maryland Automobile Dealers Association.
General Motors is also expected to announce 1,100 dealer closings this week.
"Certainly it's unfair from my perspective, having done so much for the company," Shaub said in a phone interview Thursday. "But nothing is unusual in this environment anymore. No one has ever seen business like this, so there has to be some fallout."
Press called the cuts tough but said it was better than a company liquidation where no dealer survives. "This is a difficult day for us and not a day anybody can be prepared for," he said.
Chrysler looked at a number of criteria in deciding which dealerships to close, including sales patterns, how close a dealership was to other Chrysler dealerships and whether a dealer sold a competing brand, such as Suburu or Honda, under the same roof.
More than half of the dealerships eliminated sold fewer than 100 Chrysler vehicles a year, and 345 sell competing brands at their dealership. While the dealerships slated to close account for 25 percent of the company's total dealerships, they represent just 14 percent of the company's sales volume, Press said.
Chrysler won't buy back the 40,000 vehicles that are on the lots of the dealers slated to close. The dealers won't be able to sell the cars themselves after June 9 when they are no longer affiliated with the company. Chrysler said it will help redistribute the cars to remaining dealers and said there should be a demand for them because the automaker isn't producing cars while it's in bankruptcy proceedings.
But some industry experts question whether dealers will want to buy cars in an economy where consumers aren't buying.
"I think it's going to take some work," said Jeremy Anwyl, CEO of Edmunds.com, an online automotive information site. "I don't think there are many of 2,000 the remaining dealers that will jump up and say 'give me the cars.' "
In the Baltimore area, the dealerships targeted seemed to sell only one Chrysler product. Several dealerships owned by Schaefer & Strohminger were targeted for closings. The owners and management of the company declined to comment yesterday. Antwerpen Dodge on Liberty Road in Randallstown was also listed for closing, but a spokeswoman said in an e-mail that the owner voluntarily closed the dealership a few weeks ago. Laurel Dodge on North Washington Boulevard in Laurel and Auto Village Cadillac Jeep on Bel Air Road in Bel Air are also set to close.
Mark Frostrom, 62 and the owner of Frostrom & Sons Inc., found out in a three-page letter Chrysler sent by UPS that his Jeep dealership in Pocomoke City was slated to close after 31 years. He said he wasn't surprised that his business was targeted because he sells only one Chrysler brand adjacent to his Suburu business and he's small. There is a second, larger dealership in his Eastern Shore town that sells more Chrysler brands.
"There's consolidating that needs to be done," Frostrom said in a phone interview. "Pocomoke City should have one Chrysler dealership and not two, and that's what they are doing. Is it fair that it's me and not the other guy? No."
Frostrom - who got into the car business in 1971 at age 23 after leaving the Navy to start selling Suburu cars and then Jeep seven years later - said he still hopes to stay in business. He'll absorb his employees into the Suburu side of the business and try to sell more used cars to keep revenue coming.
Shaub, who washed cars as a kid when his grandfather owned the business, said he'll now turn to selling used cars and will keep his service and repair shop going.
The dealers can appeal Chrysler's decision in bankruptcy court, but experts said that could take a long time to resolve.
"Believe me, that is a long, arduous process with a doubtful outcome," Anwyl said.
Frostrom and Shaub said they would not appeal the decisions.
The Maryland Automobile Dealers Association has said that closing dealerships isn't the way to solve Chrysler's problems. The association has said that dealers generate more than 90 percent of manufacturer revenue and are not a cost to the automaker.
"We think it's a bad idea and it makes absolutely no sense," said Peter Kitzmiller, president of the association. "It's being done by these Wall Street people who do not understand the business model of the automobile industry. They will not save a dime by cutting those dealerships."
Baltimore Sun reporter Gus G. Sentementes contributed to this article.
Area dealers on Chrysler's list
* Antwerpen Dodge, 9420 Liberty Road, Randallstown
* Jeep dealership of Heritage Auto Mall of Bel Air, 716 Belair Road, Bel Air
* Schaefer & Strohminger Dodge, 1800 Bel Air Road, Fallston
* Laurel Dodge, 10052 N. Washington Blvd., Laurel
* Schaefer & Strohminger Dodge, 1765 Joppa Road, Parkville