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Chrysler prevails in most dealer arbitrations

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Chrysler prevails in most dealer arbitrations

Alisa Priddle / The Detroit News

About halfway to the deadline to complete dealer arbitrations, Chrysler Group LLC continues to prevail in most cases brought by dealers who are fighting the automaker's shutdown orders.

The tally as of Friday was 21 decisions favoring Chrysler, while six arbitrators sided with dealers.

Chrysler terminated 789 of its 3,200 dealers last year as part of bankruptcy restructuring. Since then, 36 were offered reinstatement and 50 more were offered their franchises back if their dealerships meet the conditions of Letters of Intent -- financial, property standards and performance criteria -- required to resume selling the Chrysler, Dodge, Jeep and Ram brands.

General Motors Co. also used bankruptcy to terminate franchise agreements with about 2,000 dealers last year.

In December, in response to dealer outcry, Congress ordered arbitration hearings for rejected GM or Chrysler dealers who wanted to pursue it.

About 1,160 GM dealers challenged the forced closing and the automaker later offered to reinstate 666 of them. The rest are continuing toward arbitration. GM would not provide any updates Friday on the arbitration or reinstatement process.

Initially, 418 Chrysler dealers notified the automaker of their intent to arbitrate. But many have withdrawn, been dismissed, abandoned or settled. Only 112 are still to be heard, and they should be wrapped up by end of July, said spokesman Mike Palese. The process began in April.

The first Metro Detroit-area dealer scheduled for arbitration was Clarkston Chrysler-Jeep of Southfield. But a settlement was reached.

There have been settlements in less than a quarter of the cases so far. The company's stance has been that it is taking all arbitration cases seriously but if the cost of a settlement is less than the cost of litigation, it makes good business to resolve the matter.

If an arbitrator finds in favor of the dealer, the automaker has seven days to send a letter of intent with the reinstatement conditions.

Chrysler wants all dealers to sell all four brands, part of an initiative known as Project Genesis. It says most of the terminated dealers failed to expand to offer every brand. About 83 percent are Genesis dealers now and the goal is for 100 percent compliance by the end of 2011.

The argument did not prevail in the case of Jack Fitzgerald, a megadealer who Thursday won his arbitration involving a Chrysler-Jeep dealership in Clearwater, Fla. Fitzgerald is co-leader of the Committee to Restore Dealer Rights, which was instrumental in making arbitration an option.

"Our customers stuck up for us," Fitzgerald said, calling it gratifying that so many were at his hearing, prompting the arbitrator to decide reinstatement was in the public interest.

"And we're a well-run business that is turning a profit," he said in an interview with The Detroit News.

Fitzgerald starts arbitration Monday for his four Maryland dealerships that also were closed. He is optimistic about the outcome.

"I don't know why Chrysler is fighting this at all," Fitzgerald said, citing figures he has obtained that show retail sales since Chrysler emerged from bankruptcy are down about 27 percent -- mirroring the loss of about 27 percent of dealers.

"There's not a victory or defeat in this," Palese said. "It's a matter of shaping the dealer network the way it was envisioned in bankruptcy."

In a statement, Chrysler said reducing dealers was part of the viability plan that required government approval to receive financial aid and to consummate a partnership with Fiat SpA upon emergence from bankruptcy.

"While we are pleased that the decisions of many arbitrators reflect a keen appreciation of these circumstances, Chrysler Group is disappointed that some decisions undermine the Federal Bankruptcy Court Order that affirmed the rationalization process used to reject the dealership agreements," Chrysler said.

"Despite this, we are confident we have the dealer network in place that allows dealers to be successful, which will result in greater investment in their communities, employees and customers and, ultimately will enable the Chrysler Group to repay the U.S. taxpayers in a timely manner."

From The Detroit News: http://www.detnews.com/article/20100606/AUTO01/6060306/1148/auto01/Chrysler-prevails-in-most-dealer-arbitrations#ixzz0qGVwbSJX

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