LOS ANGELES AND WASHINGTON — Detroit's woes are hitting Main Street with a vengeance.
Chrysler moved Thursday to eliminate 789 of its dealers, using its bankruptcy status to break their franchise contracts. And as many as 1,200 General Motors Corp. dealers are expected to receive termination notices as soon as today, with an additional 1,400 coming as GM works to meet a June 1 restructuring deadline.
By the time the dust settles, nearly 20% of the nation's roughly 19,000 auto dealerships will be forced out of business, casualties of attempts by GM and Chrysler to get past the worst industry slump in decades.
And although much of the fallout from the industry's decline to date has affected auto workers in Rust Belt states, the forced extinction of so many dealers brings the huge economic effect of the crisis home to small towns and urban neighborhoods alike -- areas where dealers have reputations as civic leaders.
"This is certainly a hit to the economy," said Gary Schlossberg, senior economist at Wells Capital Management in San Francisco. But "I think the bigger impact would be on the local economies."
The National Automobile Dealers Assn. estimates that nearly 38,000 jobs could be lost in the Chrysler closures, and as many as 150,000 by the time GM's targeted dealerships are closed.
Of the 142 Chrysler dealers in California, 32 are scheduled to close, and many of them are in small and mid-size towns. Hundreds of such towns around the country rely on sales taxes for as much as 30% of their revenue and now face more budget woes without their dealerships.
Meantime, customers in rural areas will be forced to drive past closed dealerships and travel great distances to get warranty service on their vehicles.
Early Thursday, Dave Merrill received an overnight letter from Chrysler informing him that the automaker would be canceling the franchise contract for his Jeep and Dodge store in remote El Centro, Calif.
Like all affected dealerships, his will close June 9, leaving the closest Chrysler location 60 miles away -- in Arizona. Since Merrill also has Hyundai and Honda franchises, he won't be forced out of business, but said he would have to lay off 20 employees, pushing them into an Imperial County job market that has a staggering 25% unemployment rate.
"I think it's criminal," said Merrill, who has owned the location for a decade and whose sales have fallen about 45% this year. "It gets to be 115 degrees here in the summer. You break down. Where are you going to go to get serviced?"
