Rejected Auto Dealers Weighing Their Options under New Arbitration Legislation

Some dealerships that were closed during the General Motors and Chrysler Group bankruptcies last summer will be seeking arbitration to find out if reinstatement is possible. Not all of the 2,150 rejected dealers are interested in arbitration, but at Tamiami Chrysler Jeep Dodge, they are planning on moving forward toward regaining their franchise.

On December 17, 2009, a law was signed allowing for rejected dealerships to seek reinstatement through third party arbitration. The automakers now have until the middle of this month to send letters to their rejected dealers, explaining the criteria that were used in selecting them for closure.

The law allows the dealerships forty days to decide whether or not to seek reinstatement. If arbitration is chosen, the process must be finished within six months.

Alex Kurkin is an attorney from Miami who is representing dealers that had franchises with GM and Chrysler. Among his clients is Tamiami Automotive Group which has been owned by a father and son team, Carlos Planas and Alex Planas, since 1989.

Kurkin says, “That is the only one they have and they are still trying to operate it as a used car facility, which is a difficult task.” He has already begun the process of requesting arbitration and expects to hear from Chrysler sometime this month.

Kurkin is also wondering, along with many others, just how many of the 792 dealerships closed by Chrysler will be seeking reinstatement. He says that if the number is overwhelming, it may mean more favorable outcomes for dealers because the company’s attorneys will have to do “legal triage” to save time and money.

Even though some of the GM dealerships received some payment from the company in exchange for agreeing to shut down, there still may be a chance for arbitration in those cases. There are some that may feel that the compensation they received was enough, but there are others who believe they were severely shorted by GM. In such cases, the dealers may decide that it is worth forfeiting the cash payment in exchange for reinstatement.

The nation’s largest auto retailer, AutoNation, has seven Chrysler and six GM franchises that are scheduled for closure. They have no intention of seeking arbitration and feel that losing the dealerships will strengthen their market position in the long run.

Some other national dealers have decided not to pursue reinstatement; others, such as Lehman Auto World, have not decided yet.

There are some dealers, like Bud Brown (formerly Bud Brown Chrysler of Overland Park, Missouri), who have no interest at all in regaining their franchises. Brown feels betrayed and let down by Chrysler, and has no interest in having his franchise reinstated.

“To have the franchise back today would mean we’d have to go back and re-establish ourselves,” Brown said. “We’d have to go buy back our parts at full dealer costs, which we previously sold at a discount. We’d have to buy special tools again, which we sold off at a discount. We sold our new vehicles off at a discount to retail customers and other dealers.”

Brown says that if he is going to spend money on a franchise, it won’t be with Chrysler because of their poor treatment of franchisees. Instead, Brown is considering opening a Volkswagen dealership.

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