Chrysler Canada Cuts Dealers' Profits

Automaker’s Canadian unit cut dealers' profits on new vehicles and downloaded to its dealers the cost of fueling up a new vehicle in order to help receive government aid.

TORONTO (CP) -- Chrysler Canada Inc. has cut dealers' profits on new vehicles and downloaded to its dealers the cost of filling up a new vehicle with gasoline as part of their contribution to sacrifices Ottawa and Ontario are demanding from the auto maker's stakeholders.

The moves represent tens of millions of dollars worth of sacrifices by the company's 450 dealers in Canada, Chrysler president Reid Bigland said Wednesday.

The cost of filling up vehicles could range from $100,000 to $220,000, dealers said yesterday, and could wipe out profitability for those dealers who are close to the edge.

"They've got way less room to manoeuvre before they're in the red," said one dealer, who noted that the cut in dealer margins helps the auto maker's bottom line.

In another move to raise revenue, dealers will now be charged $1 every time they access an internal system that helps them find, say, a blue Dodge Caravan at another dealer if they don't have one on their own lot.

About 90 percent of the company's dealers are profitable, Bigland said in an interview with the Globe and Mail newspaper at the Canadian International Auto Show in Toronto, but he acknowledged that the drop in Canadian sales since November is making things more difficult.

Negotiations between Chrysler and the federal and Ontario governments on a $1-billion loan are about 10 days away from being completed, he said.

Conversations between the company and the Canadian Auto Workers have started, although CAW officials have said no written proposals have been exchanged.

The terms of the Chrysler loan will include a proviso that wages at the Canadian units of the Detroit Three become competitive with wages at Japanese plants in the United States.

Talks between the two governments and General Motors of Canada Ltd. on a $3-billion loan are less advanced. Ontario Economic Development Minister Michael Bryant said yesterday that GM is no longer seeking emergency loans, but is still seeking longer-term aid from the two governments.

More in Supply Chain