Rejected Auto Dealers Meetings with GM and Chrysler Yield Mixed Results

Last Friday, representative of rejected GM and Chrysler dealers met with the automakers with mixed results. The meeting with Chrysler Group representatives (the second such meeting between the dealers group and the automaker) ended when the parties reached an impasse. The breakdown came amid discussion of the dealer reinstatement question according to participants.

In stark contrast, participants in the dealer meetings with General Motors representatives described those proceedings as amicable and stated that the parties had found common ground.

According to participants in the dealer negotiations with GM, the automaker proposed that its rejected dealers appeal through company-sponsored mediation. Representatives for the dealers group countered with a proposal that would provide rejected dealers with the option of third-party arbitration. The parties agreed to continue the negotiations in meetings scheduled for today and tomorrow.

In separate, closed meetings with representatives from Chrysler Group last Friday, the dealers group was reportedly told that Chrysler plans to open 103 new dealer franchises. The locations of these new franchises were not disclosed by meeting participants.

Chrysler representatives also offered a 2½ page written proposal that previously rejected dealers (Carco dealers) who wish to apply for the new franchises will be given consideration. The proposal stated that the automaker “will not fill an applicable open point without first considering completed applications from rejected Old Carco dealers.” The proposal stipulated that interested dealers would be required to submit standard information including past sales, parts and service performance as well as customer satisfaction ratings. They would also be required to submit a business plan including management and staffing plans and verification of funding.

The proposal also required applicants “to provide an exclusive facility that meets Chrysler’s standards and requirements at a preferred location with combined Chrysler, Jeep and Dodge representation.”

Representatives for the dealers rejected the proposal, claiming that lacked both a provision for automatic reinstatement and objective criteria for reinstatement as demanded in an earlier proposal submitted by the dealers group on September 3. That proposal called for “automatic reinstatement” of any previously rejected dealer that either meets or exceeds Chrysler’s objective criteria for reinstatement.

As a provision of Chrysler’s restructuring bankruptcy, the automaker revoked the franchise agreements for 789 dealers; approximately one quarter of its dealer network.

By October 2010, GM plans to eliminate approximately 1,350 of its dealerships throughout the U.S.

Both GM and Chrysler Group agreed to provide rejected dealers access to the criteria used to determine which of their dealerships would be rejected. They also agreed to consider assisting rejected minority dealerships seeking to reduce their debt.

The meetings were organized by Democratic Party Whip, Senator Richard Durbin and House Majority Leader, Steny Hoyer (D-MD) who are pressuring GM and Chrysler to provide rejected dealers access to the rejection criteria and automatic reinstatement of dealers who meet or exceed them. They also advocate the option of third-party arbitration for rejected dealers.

Representative Chris Van Hollen (D-MD) also said that the automakers should provide monetary compensation to rejected dealers who have already closed their dealerships but who qualify for reinstatement.

Last summer the House of Representatives passed a bill that would reverse Chrysler and GMs rejection of over 2,100 dealerships but the measure stalled in the Senate. The current negotiations, which also include representatives for the National Automobile Dealers Association, are being conducted as an alternative to the proposed legislation. House leaders have indicated that they will attempt to revive their bill if the negotiations fail.

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