Documents filed by Chrysler LLC in a Manhattan bankruptcy court Thursday sent shockwaves through the Northland as several longtime car sellers learned that they probably will lose their dealerships.
The troubled automaker aims to cancel 789 dealership agreements nationwide in an effort to restructure and return to profitability. The local casualty list includes the Chrysler operations of Duluth's Miller Hill Chrysler Jeep Subaru, Sonju Two Harbors, Iron Trail Motors in Virginia, Denny Hecker's Chrysler Dodge Jeep of Pine City and Wally's Auto Service of Orr.
Chrysler dealerships in Superior and Cloquet will keep their agreements, as will Duluth Dodge.
Upon receiving the unwelcome news, Mark Mangus, owner of Wally's -- Orr's only car dealership -- called it "almost a relief."
"If it didn't happen now, it was probably going to happen to us later," he said, describing his sense of fatigue at watching Chrysler dismantle its vast dealer network.
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Approximately 25 percent of Chrysler's
3,188 dealership agreements will be voided if the company has its way. The proposed contract cancellations would take effect June 9.
The Orr dealership was founded by Mangus' grandfather, and the 70-year-old business has been in the same family for three decades. Today, the dealership employs seven people, and despite the pending changes, Mangus said he still hopes to hang onto his staff.
"I'm trying my best to keep things going," he said, describing plans to shift his focus more toward used vehicles and to step up service operations.
Unlike Mangus, many dealers spurned by Chrysler also carry other lines, enabling them to continue selling new vehicles of different makes.
"We would lose our ability to sell new Chryslers and Jeeps, but they're not the hottest products right now anyway," said Joe Plucinak, general manager of the Miller Hill dealership. "In our market, we sell more Subarus than Chrysler, Dodge and Jeep combined most months."
He predicts that losing the Chrysler dealership would cost Miller Hill about 10 percent of its sales and about 15 percent of its service business, as the company will no longer be able to perform work under the Chrysler warranties.
Unlike Mangus, Plucinak said he was shocked that Chrysler planned to pull the plug on his dealership.
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"I figured we had nothing to fear, as the only locally owned Chrysler dealership in Duluth," he said.
Chrysler's own management no longer appears to be deciding which dealerships to keep. Instead, insiders say that duty is falling to Fiat SpA, which plans to take a 20 percent ownership stake in Chrysler as it emerges from Chapter 11.
Sonju Two Harbors, another prospective cast-off, will continue selling Chevrolet, Buick, Pontiac, Ford, Mercury and Polaris products.
Keith McKinzie, the dealership's owner and general manager, said he had not received any official word from Chrysler about being cut but expected to soon. He said he could "smell trouble coming."
But McKinzie said the dealership will adjust, and part of its new strategy involves a greater emphasis on used vehicle sales.
"Sonju has always been a store that can make lemonade out of lemons," he said. "Right now, I'm working on a purchase of 300 used vehicles -- so many that we may even have to put some into Avis for a while. Here, where we live with the lake on one side and sticks on the other, we've always sold more used cars."
McKinzie thinks Chrysler has suffered in large part because of its product line. He said Sonju did well with Chrysler when it still produced the Neon, but when gas reached $4 a gallon, the carmaker no longer had a strong stable of fuel-efficient vehicles. McKinzie said Chrysler has fared better with its mini-vans, but its trucks haven't competed as well.
Lake County News-Chronicle staff writer Monica Isley contributed to this report.
