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Chrysler signals it won't follow GM on dealer reinstatement

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Chrysler signals it won't follow GM on dealer reinstatement

Neil Roland

Automotive News -- March 9, 2010 - 1:17 pm ET

WASHINGTON -- Chrysler Group, reacting to General Motors Co.'s plans to reinstate 661 rejected dealerships, is signaling that it will not follow suit while noting that the number of arbitration claims involving its former dealers has fallen 5 percent.

“Dealer appointments will be a function of the arbitrations,” Chrysler said in an e-mail yesterday to Automotive News. “The company looks forward to the expeditious completion of the arbitration process.”

As of late January, 418 of the 789 shuttered Chrysler dealerships had paid $1,625 apiece to give notice of their intent to arbitrate, the company said. That number has fallen to below 400 after some dealerships changed their minds, Chrysler said.

On Friday, GM said it plans to reinstate 661 of the 1,160 dealerships that had filed arbitration claims. A total of 2,000 were targeted to lose one or more franchises by October.

Asked whether reinstatements would be possible at Chrysler, a source close to the company said GM's rejected dealers are still in business -- meaning they have contracts to sell cars -- while Chrysler's are not.

“You can't legally reinstate something you never had a contract with,” said the source, who asked not to be identified.

A new company

After Chrysler's bankruptcy proceeding last spring, a new company emerged. The 789 Chrysler dealerships that were closed as part of the proceeding didn't get contracts with the new company, “so they can't be reinstated,” the source said.

If an arbitrator rules in favor of the dealership, though, it will get a letter of intent from the new Chrysler, the source said.

A leader of the Committee to Restore Dealer Rights, a rejected-dealer group, said Chrysler could pursue private settlement talks if it wanted to, under the new arbitration law.

“Chrysler's looking for technicalities to hide behind,” said Alan Spitzer, an Ohio dealer who is a co-leader of the committee. “The law allows them to negotiate outside arbitration.”

Change of heart

The arbitration legislation, signed by President Barack Obama in December, says, “Any legally binding agreement resulting from a voluntary negotiation between a covered manufacturer and covered dealership(s) shall not be considered inconsistent with” the provisions of the law.

Spitzer said the withdrawal from arbitration of about 20 closed Chrysler dealerships probably resulted from a change of heart once they reviewed their finances.

“Even if they got a letter of intent from Chrysler, many probably realized they didn't have the resources to make a go of it,” he said.

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