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Chrysler, dealer battle goes on

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Chrysler, dealer battle goes on

Automaker wins most arbitration cases, but group lawsuit planned over closings if talks fail

Alisa Priddle / The Detroit News

Chrysler Group LLC said Monday it won 76 of the 108 arbitration cases brought by dealers fighting their termination by the Auburn Hills-based automaker.

But some dealers who won say they don't feel much like winners, because they contend the automaker is doing everything it can to stop them from selling new cars again.

The acrimony exists as Chrysler prepares to launch updated vehicles important to its lineup this year and wants dealers to invest in separate Fiat facilities. Chrysler is counting on its dealers to reverse last year's 36 percent sales drop in the United States.

Under legislation approved by Congress, Chrysler and General Motors Co. dealers that were dropped, as part of the automakers' efforts to slim down their dealership networks, were permitted to challenge them in arbitration hearings.

In a statement Monday, Chrysler said it "carefully considered" which dealers to keep and which to shutter.

"The decisions of a great majority of the arbitrators reflect the belief that the company's dealer network decisions were not only appropriate, but essential to its future success," said Chrysler, whose initial termination list totaled 789 dealers.

"What is needed are more profitable, better performing dealers to provide better customer service. Indeed, plans to place all of our brands under one roof in well-located facilities has already resulted in enhanced dealer profitability and greater investment by existing dealerships on track with the $500 million investment plan Chrysler announced on Nov. 4, 2009."

Chrysler is expected to announce an operating profit when it reveals its second-quarter earnings Aug. 9.

Some of its former dealers are suing Chrysler in a last-ditch attempt to sell new cars again. A group lawsuit, about to be filed, could bring that number to 14.

"There is a lot of angst on the part of Chrysler dealers," said Alan Spitzer, a megadealer in Elyria, Ohio, and co-founder of the Committee to Restore Dealers that was instrumental in urging Congress to order arbitration.

"Many dealers have an ill view of Chrysler right now," said Spitzer, who had seven Chrysler franchises terminated.

The dealers that won their arbitration aren't free to simply reopen at will. First, they must meet reinstatement conditions set by Chrysler in "letters of intent."

Some say those requirements are unrealistic, expensive and unfair. Conditions include such factors as dealer finances and dealership facilities.

Another 50 dealers were offered the same terms without arbitration.

Twenty-nine dealers accepted the terms; Chrysler spokesman Mike Palese said most already are back in business.

Mo. dealership sues

The first dealership to file a full-blown lawsuit was Century Dodge Chrysler Jeep in Wentzville, Mo. Sales Manager Kevin Mock said the family business is suing Chrysler for not issuing an acceptable franchise agreement, despite a May 26 arbitration ruling ordering it to do so.

Deland Dodge of Deland, Fla., filed next, asking that the arbitrator's ruling to reinstate be carried out without the letters containing new conditions. Chrysler has countered by asking the court to declare that arbitrators don't have the authority to order Chrysler to add dealers to its network without meeting the company's terms.

Jack Haigh, owner of Crossroads Superstore in Atoka, Okla., is part of a possible group action. Lawyer Leonard Ballavia of Bellavia Gentile & Associates LLP in Mineola, N.Y., said he has been contacted by Haigh and 11 others. The suit will be filed if talks with Chrysler do not resolve the issues.

"Chrysler's position so flagrantly violates Congress' mandate that we stand a good chance of recovering punitive damages," Bellavia said.

Mock said Century has been in business for more than 20 years, and it completed expensive renovations six months before the franchise was terminated.

"We still own the facility and everything is in place: the new signs, furniture, phones, equipment in the shop. We continue to pay the mortgage, taxes, phone bills, heating and electricity with no revenue coming in. We're eager and ready to open."

Mock wants the old agreement restored and not to be held to new requirements that are even more difficult to meet.

That is not legally possible, said Chrysler's Palese.

The contracts of the terminated dealers, he said, remained with old Chrysler in bankruptcy. Reinstatement is akin to starting from scratch with the new post-bankruptcy company and triggers the more rigid contract.

Strict new conditions are also warranted because terminated dealers were underperformers that didn't meet the bar that Chrysler set, said spokesman Gualberto Ranieri.

Goal is 2,300 dealers

Chrysler has spent $240 million since 2009 toward a goal of 2,300 dealerships, all selling four brands. Fewer than half were profitable in 2008, but average net earnings in 2009 were $200,000 per dealership, said spokesman Ralph Kisiel. In the first quarter of this year, that figure fell to $150,000.

For Haigh, in a rural town of 5,500, it will cost $800,000 to double the size of his dealership and meet the new requirements.

He was among the 50 initially on the cut list who were offered reinstatement without arbitration, but he found Chrysler's requirements too difficult. Nor was he willing to accept new terms that could terminate his franchise again, if the closest dealer -- 55 miles away -- objected to his reopening.

"We tried for weeks to negotiate terms, but they stonewalled," Haigh said.

From The Detroit News: http://www.detnews.com/article/20100727/AUTO01/7270320/1148/auto01/Chrysler--dealer-battle-goes-on#ixzz0ut2EEmYs

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