Chrysler Grants Dealership to Superstore Chain : Autos: Analysts say the agreement with a unit of Circuit City is a wake-up call for new-car dealers.

Chrysler Corp. granted a new-car franchise Thursday to the used-car superstore operation of Circuit City Stores, a step that could eventually change how vehicles are sold nationwide and may signal a shift in dealer ownership patterns.

The deal will allow Circuit City’s Carmax outlet in suburban Atlanta to sell new Chryslers, Plymouths, Jeeps and Eagles beginning next year.

The action marks the first time that a car maker has granted a new-car franchise to a publicly owned company. Traditionally, these franchises have been owned and operated by local businessmen and entrepreneurs.

It also is an acknowledgment by Detroit that Circuit City has come up with a more modern and effective way to market used cars and trucks--a formula that presumably will now be tested with new cars.

“It’s clearly unprecedented,” said Chris Cedergren, an analyst with AutoPacific Group in Santa Ana. “With this franchise agreement, a lot of dominoes are expected to fall.”

Circuit City, which sells brand-name electronics, appliances, computers and music software in 375 superstores nationwide, has blazed a new trail in the auto business in recent years by developing the superstore concept for used cars.

Carmax now operates four used-car dealerships in the Southeast and is expected to open dozens more nationwide in the next few years. The superstore offers 1,200 vehicles on a 30-acre site in Norcross, Ga. (California has been rumored as the possible site of its next outlets.)

The Carmax dealerships are known for their customer-friendly and experienced salespeople. The dealerships offer a large selection of used vehicles, no-haggle pricing and a touch-screen computer system that allows customers to view cars by price range and arrange financing without leaving the showroom. The used cars undergo a rigorous inspection and carry 30-day warranties.

Although both Carmax and Chrysler were cautious in assessing the broad implications of their partnership, it has the potential to evolve into a nationwide chain of auto dealerships--one that could pose a threat to existing franchises.

“This agreement gives Carmax the opportunity to explore new-car retailing with some of the country’s most popular brand names,” said W. Austin Ligon, Circuit City’s automotive senior vice president.

It also gives Carmax access to exclusive Chrysler auto auctions, where late-model used cars are sold to dealers. This is often where the most attractive, low-mileage leased vehicles can be obtained.

Tom Pappert, Chrysler’s vice president of sales and marketing, said one attraction of Carmax is its unusually high customer satisfaction ratings. He said Carmax provides a “Nordstrom comfort level” to buyers. “There are some things we can learn from them,” he said.

But the move is certain to rile existing new-car dealers, who have been under increasing financial and competitive pressures. Though auto dealerships historically have been awarded to local entrepreneurs, large chains of dealerships have begun to dominate major markets in recent times.

Now major retailers and deep-pocket investors--including some publicly owned companies--are eyeing the business.

“This is a major departure in the way franchises are normally given,” said Ted Orme, spokesman for the National Automotive Dealers Assn.

Still, Orme said the Carmax franchise represents only one store in a business with 22,000 dealerships. Consumers will not be rushing to their closest Wal-Mart any time soon to purchase a new or used vehicle, he predicted.

But other analysts said the Chrysler partnership with Carmax serves notice to dealers that they must adopt new methods to make the car-buying experience less daunting and more pleasant.

“This is a wake-up call to dealers,” said Donald Keithley, a partner with J.D. Power & Associates, an Agoura Hills auto consulting and research firm.

Frustrated consumers are looking for alternatives to the traditional showroom haggling, he said. This can be seen in the growing use of car-buying services and the patronizing of outlets that offer one-price selling.

While auto manufacturing changed drastically over the last 15 years under the competitive threat from Japan, the retailing side of the business has not evolved as rapidly, analysts say.

There have been notable advances. Saturn Corp., General Motor Corp.’s highly touted import-fighting unit, introduced highly trained sales forces that coddled customers with soft-sell techniques. More dealers are adopting no-haggle price strategies and adapting computer technology to help consumers.