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Chrysler may face $25,000 daily fine in Colo. over rejected dealer law

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Chrysler may face $25,000 daily fine in Colo. over rejected dealer law

Neil Roland

Automotive News -- May 3, 2010 - 4:36 pm ET

WASHINGTON -- The Colorado Senate is prepared to approve a bill imposing fines of up to $25,000 a day on Chrysler Group if it doesn't comply with a new state law requiring dealer reinstatement under certain circumstances.

The Senate is expected to vote on the bill tomorrow.

But even if the legislation then passes the House and is signed by Gov. Bill Ritter, though, its fate is unclear because Chrysler asked U.S. Bankruptcy Court last month to block the dealer reinstatement law, enacted in March.

Today, the Colorado Senate approved the bill in a unanimous voice vote, said Democratic Sen. Chris Romer. The body is likely to approve it again unanimously in a recorded vote tomorrow, he said.

The legislation then would go to the House, which has until its May 12 recess to decide whether to pass the bill and send it to the governor for final approval.

First refusal

“We hope Chrysler will listen to the will of the people,” Romer said in an interview today.

The Colorado law requires Chrysler and General Motors Co. to offer a rejected dealership the right of first refusal if either company wants to open a point in the rejected dealer's old market. If the automaker already has awarded such a franchise, it must offer to reinstate the rejected dealership or compensate it.

Chrysler told at least one rejected Colorado dealer who requested reinstatement last month that it has no intention of offering reinstatement under the new state law.

Romer, who sponsored the new bill, said he hopes the fine will add enforcement muscle that will stop Chrysler from flouting the March law.

U.S. court vs. state

In a statement, Chrysler said: “The actions to reduce Chrysler Group's dealer network were a necessary part of Chrysler Group's viability and central to the interim financing and proposed partnership with Fiat. The company is confident that we will prevail on the merits based upon federal orders entered by the Bankruptcy Court.''

In asking the Bankruptcy Court in New York last month to block the new Colorado law, Chrysler took action similar to its December suits seeking to keep similar new laws in four other states from taking effect.

The company's suits, which argue that federal bankruptcy law pre-empts state law, continue against Illinois, Oregon and Maine. The state of North Carolina last month backed down from enforcing its law in a settlement with Chrysler.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100503/RETAIL07/100509964/1400#ixzz0muKqYdg3

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