Lawmakers Ask Chrysler to Stop Offering New Franchises Pending Arbitration for Rejected Dealers

Representatives Pete Hoekstra (R-MI) and Steven LaTourette (R-OH) have sent a letter to Chrysler Group requesting that the automaker stop awarding new dealer franchises in markets formerly assigned to rejected dealers who have filed for reinstatement through third-party arbitration.

In the letter to Chrysler-Fiat CEO Sergio Marchionne the lawmakers said, We are concerned about your treatment of the loyal Chrysler dealerships that have stood by your brand for decades.

Some rejected dealers have expressed concerns that they could win reinstatement through the arbitration process only to find that Chrysler has granted a new franchise in the same market.

The letter, dated Wednesday March 3, 2010 states, Dealerships deserve a good-faith effort entering the arbitration process.

Chrysler has thus far declined to comment on the letter.

A number of rejected Chrysler dealers have raised concerns over Chrysler’s new franchise awards which would appear to be at odds with upcoming arbitration hearings.

Last fall, Chrysler told dealers that it planned to award approximately 100 new franchises throughout the U.S. but has refused to offer rejected dealers first right of refusal if a new franchise is offered in their former market.

Committee to Restore Dealer Rights co-head Tammy Darvish accuses Chrysler of deliberately attempting to undermine upcoming arbitration hearings. She said, Chrysler has blatantly circumvented this process as a sick sport, and added, This behavior of Chrysler is an embarrassment to business ethics in America.

Lawmakers and dealer groups have raised similar concerns over General Motors’ actions. Last month Representative Hoekstra, who is campaigning against Democrat, Jennifer Granholm, in the upcoming Michigan gubernatorial election, has sent a similar letter to GM.

Darvish said the Committee to Restore Dealer Rights has received far more complaints about new franchise awards from rejected Chrysler dealers than GM dealers. GM has instructed 1,300 of its dealers to wind down their operations by October 31 unless they can prevail in retaining their franchises through arbitration. The automaker has begun contacting some rejected dealers with offers to enter into settlement talks as a way of avoiding arbitration.

Of the 789 Chrysler Group dealerships stripped of their franchises last year, more than 400 have filed for reinstatement through arbitration.

By law, the arbitration process is to be completed by mid-June unless arbitrators choose to extend it. In that case, the parties will have up to one additional month to decide the more than 1,550 cases scheduled to be heard.

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