May 15 (Bloomberg) -- Stanley Balzekas Jr. served in the U.S. Army and survived six months in World War II German prison camps. His Chicago Chrysler-Jeep franchise won’t survive the automaker’s cutbacks.

Balzekas’s family has been in the business since 1919, when his father, Stanley Sr., a blacksmith from Lithuania, opened his first dealership. In the early years, Balzekas Motor Sales Inc. carried Pontiacs, Chevrolets and Studebakers. It’s been a Chrysler-only shop since 1933.

“After 90 years, we are a piece of meat,” said Balzekas, 85, whose two sons and one daughter also work at the dealership. A letter from Chrysler LLC early yesterday notified him that “we are no longer a dealer,” he said in a telephone interview.

From Virginia to California, Chrysler’s decision to cancel 789 dealership agreements forced franchisees to assess what they’ll do next, prepare to dismiss employees and ponder how to wind down decades-long relationships with their customers.

The reductions represent about 25 percent of the 3,200 Chrysler, Dodge and Jeep-brand dealers. Those who survive stand to gain business as their ranks are thinned. Those on the cut list will be gone by about June 9, Chrysler said.

In Seaside, California, fourth-generation dealer Donald Butts will lose the Jeep brand from his Pontiac-Cadillac-Jeep store on June 9.

“I cannot see how this will help them recover, walking away from entire markets,” Butts said in a telephone interview. Butts, who declined to give his age, said his family began selling General Motors Corp.’s Buicks in 1907 and took on Jeep about 25 years ago.

Butts will have to give up Pontiac, too, because GM’s survival plan calls for dropping that brand. GM said today it was notifying 1,100 dealers whose franchise agreements aren’t being renewed.

Strengthening Dealers

Shrinking the number of Chrysler outlets helps ensure profits for the remainder, President Jim Press said. Stronger dealers help Auburn Hills, Michigan-based Chrysler because they’ll have the resources to invest in their properties, maintain a uniformly high level of service, and sell more cars, Press said on a conference call.

Chrysler culled mostly among retailers that had annual sales of 100 or fewer vehicles; sold just one Chrysler brand; or carried Chrysler vehicles along with those of other automakers, he said.

Surviving dealers will be urged to purchase autos and supplies of replacement parts from those being closed, Press said. Dealers on the list collectively accounted for 14 percent of the company’s sales, Press said.

Job Losses

Job losses, which Chrysler said it didn’t estimate, will be part of the fallout.

Butts, the California dealer, said at least three service technicians would have to find work elsewhere. He owns another dealership selling Honda Motor Co.’s Acura brand and wouldn’t say how many of his 39 employees would be affected.

John Gunning, 69, was among the dealers on the shutdown list who said he saw the move coming because his Manassas Dodge in Virginia sells only one of Chrysler’s three brands.

“There are still a lot of things up in the air,” said Gunning. “Obviously I am disappointed, but I’m not amazed.”

Gunning used to be on Chrysler’s national dealer advisory board. Last month, his dealership was the top-selling Dodge outlet in Northern Virginia. He also owns a dealership for Fuji Heavy Industries Ltd.’s Subaru, which he will keep open, he said.

“I’m not convinced Chrysler is going to make it anyway,” he said. “I just want to try to save my Subaru franchise.”

Final Determination

Yesterday’s list may not be the last one. Turin, Italy- based Fiat, which will control a new company that is buying most of Chrysler’s assets, will make the final determination on which dealers are kept as part of the new automaker.

“I’m furious,” Jeff Duvall, 50, co-owner of Duvall Chrysler Dodge Jeep Inc. in Clayton, Georgia, said after getting his closure notice. “I’m beyond furious. You mark my word, I’m going to fight this tooth and nail.”

His store opened less than a year ago in the town about 150 miles northeast of Atlanta, he said. “We’ve spent thousands and thousands of dollars on architecture plans and engineering plans,” he said. “We were about to start construction on a new facility.”

Duvall said he mailed a $4,000 check yesterday to Cincinnati-based Squire Sanders Dempsey LLP, which is representing the dealers targeted for closing. The law firm will petition the bankruptcy court to keep the franchise agreements.

“It’s worth it,” said Duvall. “All I want is an opportunity to represent Chrysler and sell and service their products.”

Georgia Survivor

Andy Gill, 64, was relieved that his Dallas Dodge Chrysler Jeep in Dallas, Georgia, escaped the cuts. While his store stands to benefit as others in the region fold, he said he felt the anguish of colleagues losing their businesses and wondered aloud about the toll on Chrysler from folding so many retailers.

“They just fired 800 of their customers,” Gill said. “The dealer buys the car from the factory. Our customers are the people who buy from us. That rationale kind of makes me scratch my head.”

Balzekas, the Chicago dealer, said he will keep his operation open at least until the inventory of 125 new and used vehicles is sold. After that, he said, he isn’t sure of what he’ll do, except for one thing: He won’t go back to doing business with Chrysler.

“They don’t care,” Balzekas said. “I told them, ‘Why don’t you work with smaller dealers, listen and get out there? Talk to people. Don’t sit in the high towers.’”

He said he broke the news to his 22 full-time workers yesterday morning. To soften the blow, he treated them all to a pizza lunch.

To contact the reporters on this story: Mike Ramsey in Southfield, Michigan, at mramsey6@bloomberg.net; Ryan Flinn in San Francisco at rflinn@bloomberg.net; Shruti Date Singh in Chicago at ssingh28@bloomberg.net.

Last Updated: May 15, 2009 12:50 EDT