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Chrysler halts franchise awards in rejected dealers' backyards

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Chrysler halts franchise awards in rejected dealers' backyards

Neil Roland

Automotive News -- March 16, 2010 - 2:34 pm ET

WASHINGTON -- Chrysler Group, after congressional pressure and complaints from rejected dealers, said it will stop awarding new franchises temporarily in the markets of closed dealerships that are pursuing arbitration.

“Chrysler Group understands that the practice at this time may be a cause of concern among policymakers and among arbitrating dealers,” the automaker said in a statement. “As a measure of good faith, Chrysler Group will not proceed with network actions that directly impact an arbitrating dealer until the arbitrator has had a chance to rule in that case.”

Chrysler said the only exception would be if the company is “contractually obligated” to award a new franchise.

Rep. Pete Hoekstra, R-Mich., and Steven LaTourette, R-Ohio, asked Chrysler this month to stop the practice. They said shuttered dealerships could win reinstatement from an arbitrator but be prevented from reopening because a new franchise already had been awarded in that market.

Some rejected dealers also have complained about Chrysler's new franchise awards in recent weeks.

The moratorium on new franchise awards is Chrysler's second in recent months.

The company initiated a halt from October to December during unsuccessful settlement talks with dealer groups about an alternative to legislation.

Chrysler told dealer groups last fall it planned to award about 100 new U.S. franchises. The company has declined to confirm or update this figure.

''This is window dressing to placate Congress,” Tamara Darvish, a leader of the Committee to Restore Dealer Rights, which represents rejected Chrysler and General Motors Co. dealerships, said today.

Chrysler shut 789 dealerships as part of bankruptcy proceedings last spring. Close to 400 of them are seeking reinstatement through arbitration.

Under legislation signed by President Barack Obama in December, arbitrators have until mid-June to decide their cases. They can extend the process for a month at their discretion.

Chrysler has been trying to realign its dealer network to consolidate all its brands under one roof.

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