Reinstated Chrysler and GM Dealers May Face Additional Battles after Arbitration

In some cases, reinstated Chrysler and GM dealers may find themselves competing with newly appointed dealers for their old territories. That’s because, following last summer’s bankruptcy proceedings, GM and Chrysler appointed new franchisees to fill the voids left by those they had rejected.

Chrysler has said that, in such cases, it expects protests to be brought against the reinstated dealers in accordance with state franchise laws. Last fall, the company announced that it planned to add about 100 new dealers but has not disclosed how many have actually received franchises.

Of the 789 dealers rejected by the company, 409 are seeking reinstatement through the arbitration process.

Ohio dealer and NADA representative for Chrysler, Chuck Eddy, said the situation is complicated and rife with emotion from all sides. He said, “That dealer who lost his franchise and has plenty of capital, he’s going to be passionate. Chrysler’s going to be passionate about why they don’t want that dealer back. The guy across the street who got that franchise is very passionate. Now there’s a burden on Chrysler dealing with this [which] they don’t need.”

Arbitration hearings, which were mandated by law last January, are expected to commence in early March and are scheduled to be completed by mid-June. Arbitrators, however, have the option of extending the proceedings by one month.

The American Arbitration Association is in the process of assigning arbitrators to 1,573 cases filed by rejected dealers.

In some cases of contested territory, rejected dealers are already negotiating with new dealers in hopes of reaching solutions without the need for messy and costly court proceedings.

An example of such cooperation is Wallace Automotive Group’s Chrysler-Jeep franchise in Stuart, Florida. Owner, Bill Wallace, is confident he will be reinstated through the arbitration process. After Wallace was rejected, however, Chrysler offered the franchise to Jim Arrigo, who owns Arrigo Dodge-Chrysler-Jeep in West Palm Beach. According to Wallace, Arrigo has assured him that he will not exercise the letter of intent he received from Chrysler until the arbitration process has concluded.

Wallace, whose dealership group owns 14 franchises, says he has every reason to believe that he will prevail in his attempts to be reinstated. He said, “We have our floorplan line in place. We have proof that we had multimillions in the bank when this happened, and have more than that. We never had a floorplan problem.”

Wallace hopes the arbitration process will provide answers to why his dealership was terminated last May. He has requested that several former Chrysler executives testify during the proceedings “ including the company’s former deputy CEO, Jim Press and executive vice president of sales, Steven Landry.

Press, who left Chrysler last fall, said that he has received no requests from dealers asking him to testify. He also said, “I don’t know what value I’d have. I never even saw the final list [of rejected dealers]. I don’t know anything about the specific dealer actions. I couldn’t really add anything to that. I wasn’t involved in individual dealer actions.”

For its part, spokeswoman Ryndee Carney said GM awarded new dealerships on a very limited basis. She declined to offer exact numbers but said new franchises were awarded in select cases. She also said, “Our plan is not to re-establish dealers in a vast majority of markets that contain wind-down dealers.” She also pointed out that GM’s wind-down dealers were provided the opportunity to apply for new franchises that were made available within their markets.

Chrysler terminated the franchises of its rejected dealers last June, leaving them no option but to shut down or pursue franchise opportunities with other automakers. GM’s rejected dealers, on the other hand, have until October 31 to wind down their operations. Many have kept their stores open in the hopes that they will be reinstated through the arbitration process.

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