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Chrysler's reinstatement offer upsets dealers

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Chrysler's reinstatement offer upsets dealers

Terminated franchise owners balk at letters offering reinstatement

Alisa Priddle / The Detroit News

Chrysler Group LLC's letter of intent to reinstate 50 closed franchises details a host of conditions for reopening that some dealers described as onerous and ridiculous.

A copy of the letter, obtained by The Detroit News, includes a provision that allows Chrysler to withdraw the offer if any protests, lawsuits or other challenges to reinstatement are not resolved within 30 days.

In addition, reinstated dealers must meet financial requirements to cover inventory and working capital, and they must enter into a minimum five-year lease. During that time, they would be barred from protesting any move by Chrysler to put another dealer nearby.

"These so-called 'letters of intent' are absolutely ridiculous," said Tammy Darvish, who lost two of her eight Chrysler franchises in Silver Spring, Md. "This is the same nonsense they pulled throughout months of our negotiations to find a 'non-legislative solution' to restoring dealers."

Darvish was not among the dealers who got a letter but is seeking arbitration for possible reinstatement.

In a statement, Chrysler said it is "speaking with the dealers involved," but has "not released any additional" details.

A company spokeswoman described the letter of intent as standard.

In December, Congress mandated arbitration for Chrysler and General Motors Co. dealers who were terminated as part of the automakers' bankruptcies.

GM is prepared to reinstate 660 of its 2,000 terminated dealers.

The terms in GM's letter of intent were standard and reasonable, said Mike Charapp, a partner with Charapp & Weiss LLP in McLean, Wash., who represents dealers that have been terminated by both automakers.

Jack Fitzgerald, who has dealerships in Maryland and Pennsylvania and is a leader of the Committee to Restore Dealer Rights, a lobbying group, said he had never seen a letter with terms like Chrysler's.

"I have not seen that detail in a letter of intent before," he said.

Chrysler terminated 789 dealers last June and has since reinstated 36. Another 50 began receiving letters this week that would allow them to pursue reopening their franchises.

Among other stipulations in the letter, dealers whose reinstatement is not challenged will be notified and given 90 days to submit architectural plans that meet specifications that include arches as part of the exterior, and use specified materials.

The dealership also must have customer lounges consistent with the vehicle brand, plus covered service drive-in areas, a children's play area, refreshment section, Mopar accessory display area and specific signs.

Once the plans are deemed acceptable, the dealer has 90 days to begin construction.

There are numerous time constraints.

Dealer must complete and return their response within 10 days; those who accept must withdraw their arbitration demand filed with the American Arbitration Association.

Chrysler dealers have 60 days to file a site proposal and if Chrysler has not approved it within 30 days, it is deemed automatically rejected.

The letter of intent expires in 90 days if the facility the dealer plans to use meets Chrysler's conditions; it expires in eight months if renovations are necessary and in 18 months if the dealer is building a new facility.

Failure to meet any deadline can result in termination of the offer in the letter.

"They have zero intention of being decent about this," Darvish said.

Fitzgerald, who like Darvish has not received a reinstatement offer, said "Chrysler is not dealing in good faith."

Chrysler said last week it also is seeking to resolve disputes with other dealers -- those who aren't being offered reinstatement -- outside of arbitration.

About 400 disenfranchised Chrysler dealers filed for arbitration, a process that must be wrapped up in June.

Arbitration is a costly process, Charapp said. A dealer is looking at $20,000 to $100,000, including the arbitrator's time, legal and expert fees and the $2,250 fee to the American Arbitration Association.

From The Detroit News:


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