Chrysler Takes First Step in Dealer Arbitration Process

By Brendan Moore

12.24.2009

Chrysler logo smallAutomotive News is reporting that Chrysler has sent the initial required letter regarding arbitration to 789 rejected dealers, starting a process that potentially could reinstate the dealers, one that is required by recent legislation.

The terms of the measure require the dealers to respond to Chrysler by January 25, 2010, if they wish to seek arbitration. The new law requires the arbitration process to be resolved within six months.

Chrysler also stated in the form letter that the company is “assessing its rights and remedies with respect” to the legislation, which would suggest that it is still considering legal action to challenge the legality of the legislation as an option to the arbitration process.

Chrysler plans to follow the first form letter with a second, individual letter to each dealer that will detail the company’s list of reasons for rejecting the dealer. That follow-up letter must be sent before January 16.

Fiat CEO Sergio Marchionne stated to reporters a few days ago that Chrysler is considering going to court to prevent Congress from forcing Chrysler into arbitration between it and the terminated dealers, or, forcing the company to reinstate the dealers that Chrysler shed during bankruptcy proceedings.

The same legislation also requires GM into the same situation; GM has not yet decided what it will do in response, according to GM representatives. GM has not yet contacted any dealers as part of the arbitration requirement.

Marchionne said that restoring large numbers of dealerships, many of which ceased business operations sometime ago, could “cause havoc within Chrysler”.

It seems apparent that Chrysler intends to comply with the legislation while it keeps its options open regarding a legal challenge. It may be utilizing a “wait and see” attitude concerning the level of response from dealers requesting arbitration before it decides on its next move. It is expected that many of the terminated dealers will not enter arbitration proceedings as a result of the passage of time (having moved on in their business endeavors) or the expense of the arbitration process, or, some combination of both.

Additionally, there are some dealers that will decide not to keep fighting to keep their dealership after they see the list of reasons that Chrysler used to decide to terminate them in the first place, believing their odds of success are low.

The dealers that do decide to enter arbitration proceedings will undoubtedly be the ones with the highest level of anger regarding Chrysler’s termination of their store, and, the financial wherewithal to fund their part of the potentially expensive arbitration process.

There is a great deal of vitriol being publicly vented by the terminated dealers; it will be interesting to see just how many of the aggrieved dealers decide to keep fighting by leveraging the arbitration process offered to them through the new legislation.

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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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3 Comments

  1. There is a lot of posturing and blustering from the rejected dealers about all the revenge they’re going to have against Chrysler, but I agree that many of them (most of them) are going to NOT pursue arbitration.

    All this jawing makes them feel better, but the amount of dealers that actually do anything is going to be small.

  2. XCite, you are spot on. Let’s just see how many dealers put words into action. I hope there are some reinstatements, but I think a lot of dealers will just say the hell with it.

  3. Don’t care if a Chrysler badge ever shows up on a car again. I sure as heck don’t care if there are less Chrysler dealers.

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