Many of the 789 dealerships that Chrysler plans to close will begin presenting their case to bankruptcy court on Thursday, arguing that the automaker was undermining its turnaround by terminating the franchises.
Chrysler filed for bankruptcy on April 30 and said about two weeks later that it was shutting a quarter of its dealer network. The company said it wanted to slim down the number of stores to better match the dramatic drop in sales, which have fallen more than 40 percent during the recession.
In bankruptcy court hearings last week on the sale of most of the company's assets to Italian automaker Fiat, Chrysler executives said they wanted fewer, more-profitable dealerships that could invest more in their locations and could compete better with dealers representing rival automakers.
At those hearings, attorneys for dealers questioned Chrysler's judgment in dropping the locations, some of which had recently received awards and complimentary letters from the company. Executives for Chrysler struggled to offer specifics on cost savings generated by the closures.
A New Chrysler will emerge from bankruptcy in a few days, pending an appeal of the Fiat sale. The 789 dealers will be severed from Chrysler on June 9. Some will remain open to sell used cars.
(Reporting by Tom Hals; Editing by Lisa Von Ahn)