Lawmakers Agree on Arbitration Plan for Rejected GM and Chrysler Dealers

Dealers axed by General Motors and Chrysler will have access to third-party arbitration, which is more than the automakers had planned to allow. The arbitration provision was included in a financial spending bill that was recently approved by lawmakers. The House may very well vote on the bill within the next week with a Senate vote expected the following week. President Obama is expected to sign the legislation.

Under the provision, neutral arbitrators would be charged with making sure all parties involved (dealers, the public and the companies) are treated equally. Dealers would be able to “present any relevant information” during the arbitration process.

House Majority Leader Steny Hoyer (Dem, MD) said, “It is imperative for both auto dealers and auto companies to have a transparent process that gives dealers a chance to make their case for remaining open, while respecting the companies need to return to profitability.”

After the president signs the legislation, dealers will be allowed forty days to come to a decision regarding arbitration. The process must begin within 140 days of the decision to proceed.

The National Automobile Dealers Association (NADA) says that the bill would “provide a fair process to address dealer concerns about the recent closure of General Motors and Chrysler dealerships.”

"We will continue to work constructively with congressional members and dealers on a resolution that balances the interests of GM and its dealers," GM spokesman Greg Martin said.

Chrysler said in a statement: "We are committed to work with Congress and the dealers to achieve a process that equitably balances the interests of the discontinued dealers, our current dealers, and the taxpayers relying on Chrysler to repay its loans."

If enacted, the bill would allow the neutral arbitrators to assess the dealership requesting arbitration. Criteria used would be past performance, profitability, experience and economic vitality. Arbitrators will also look at the local area demographics and geography, how the dealership meets its goals and its business plan.

Senators Hoyer and Durbin also say that the economic impact of reopening a rejected dealership on the surrounding dealerships would also come under consideration. Also, almost all Saab, Saturn, Hummer and Pontiac dealers would be ineligible for the arbitration process.

Dealerships that would be eligible will include those that had franchise agreements in effect as of October 3, 2008 and that were terminated or are scheduled to be terminated by the end of 2010.

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