By on December 29, 2010

Chrysler’s bailout-era dealer cull has ended up being something of a nightmare, with a number of dealers successfully fighting for reinstatement as federal investigators look into possible criminal wrongdoing. And whereas GM has basically rolled back much of its dealer cull, Chrysler has consistently used arbitrary calculi for closing dealers and has resisted giving dealers the opportunity to reclaim their franchises. Now, the dealers that have won reinstatement in congressionally-mandated arbitration hearings are facing a new threat: relocation. Automotive News [sub] reports that Chrysler’s method of dealing with reinstated dealers is to force them to relocate wherever Chrysler wants them to go. Chrysler has filed a request in a Michigan District Court, asking for the ability to relocate some 20 dealers in 6 Midwestern states, a move it says it must undertake in order to protect its non-culled dealers. But, having picked the winners and losers among its dealers only to see some of them reinstated, shouldn’t these reinstated dealers be afforded the same rights as the dealers who weren’t culled in the first place?

Of course, like everything else involved with the dealer cull, this conflict isn’t a simple one. The conflict centers around Livonia Chrysler Jeep, of Livonia, MI, which lost its market to Crestwood Dodge Chrysler Jeep Ram. According to Chrysler’s request

(Livonia Chrysler Jeep’s) interpretation of the (dealer arbitration) Act contradicts the plain language of the Act, and its civil action… seeks to fashion a remedy that is nowhere to be found in the Act, (So) Chrysler respectfully requests … a declaration that the Act limits the arbitrator’s power to the determination of whether or not the covered dealership should be added to the (OEM’s) dealer network…

What Chrysler is referring to as the remedy not found in the reinstatement Act is, according to AN, the right to have their old locations and markets back. As Chrysler sees it

reinstated dealers have won back a right to be dealers again, but not necessarily to the same locations and market conditions as before. They also may have to satisfy other state regulations or meet market conditions before they can reopen…

Livonia Chrysler, for example, may not be able to reopen in its old location because it would compete too closely with Crestwood Dodge Chrysler Jeep Ram in nearby Garden City and run afoul of a state law governing “like-line” dealers in overlapping markets.

The response from Livonia and other reinstated dealers:

It (the new counterclaim) was a strange thing for Chrysler to do because a lot of this ruling is going to come down to how you view state franchise law, which is different in Michigan from these other states…
Our position in litigation is, we have to be put back to the way life was. You have to give back (to Livonia) what you took and gave to Crestwood. Why else would Congress have created this process for reinstatement? Not to just put us into a whole new other fight in court
A messy mess, to be sure. There are several motions pending to have Chrysler’s request summarily dismissed, although those motions won’t be heard until March. And as this conflict with no winners drags on, it becomes more and more clear with every bit of nasty news that the whole dealer cull (as it was implemented) probably should have been avoided. Dealer reduction was working prior to the bailout as a long, slow, deliberative process… accelerating the shutdowns arbitrarily just as the OEMs were receiving billions for their failures will go down in history as one of the worst elements of the great auto bailout.
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14 Comments on “Chrysler Moves To Relocate Reinstated Dealers...”


  • avatar
    Educator(of teachers)Dan

    Too bad there isn’t a “report card” for dealers to meet yearly based on customer service and sales that actually has some teeth (you know in the dealer’s contract) and if they don’t meet it they can be slated for termination.
     
    BTW that would be a great idea for all auto manufacturers.

    • 0 avatar
      Autojunkie


      Or any kind of franchiser/franchisee situation. It’s an excellent idea!

      Unfortunately, the dealer lobby is huge and would fight (pay) it off. This is, of course, why car dealer were specifically not included in the new credit/banking laws and also why they have congress fighting to give them their jobs back.

    • 0 avatar
      Educator(of teachers)Dan

      One of the worst dealers in our area (which was a Chrysler/Dodge/Jeep dealership BTW) managed to get their hands on a Hyundai franchise much to my shock.  (Worse in the perspective that they were notorious for shady financing and making work for themselves when cars were brought in for service.) It lasted about 6 months before Hyundai pulled the plug and told them to GTH.  Now while I’d like to have a Hyundai franchise closer than 130 miles away, I say kudos to Hyundai.

    • 0 avatar
      philadlj

      I was just thinking that: rather than empty their bank accounts on legal battles with Chrysler, culled dealers could look at the market they’re in and determine whether a Hyundai or Kia franchise is a wiser bet. Of course, whether they’re peddling Vipers or Velosters makes no difference: a crooked dealership is worse than no dealership at all.

    • 0 avatar
      nrd515

      I was kind of shocked when Chrysler finally had enough complaints and yanked the franchise of the worst (And not by a small increment) of the local dealers and gave it to another one, with Jeep tossed in as a bonus. I almost feel sorry for the rich folks who buy their Mercedes and Audis from them. Almost.

  • avatar
    Autojunkie

    I wish I had the same legal backing (congress) when I was laid off from my job two years ago.

    I’m sick of the bullshit these dealers are pulling. They need to suck it up and find other work like th rest of us. There is a reason the non-culled dealers were chosen over the others. I accepted that when I was one of the 80% picked to be cut from my department.

    • 0 avatar
      jacad

      There is a vast difference between losing a job when working for somone else and owning a franchise. Understanding that difference might be valuable in searching for employment going forward.

    • 0 avatar
      geozinger

      @jacad: I think that autojunkie is making a not so perfect analogy here. His lament was about losing his job and having no recourse contrasted against these dealers having considerable lobbying power (friends in congress) getting them their franchises (jobs) back.
       
      As someone who has been laid off (but since re-hired), I can easily understand his comparison.

  • avatar
    dwford

    This just shows you how much money there is to be made in a car dealership that these people would fight tooth and nail to regain what have to be the worst franchsies in the industry.

    • 0 avatar
      NJ Pilot

      Maybe, or maybe it shows how much investment these businesses have in the brand: collateral, goodwill, training, parts, etc, etc.  An auto dealer has a massive investment in his or her business with the terms codified in a contract. The beef many dealers had with this “prrocess” is that the terminations were done in violation with their contracts in a capricious and arbitrary manner, justified by the extra-legal “bankruptcy” process.
       
      I’d be pissed, too.

  • avatar
    John Horner

    “Dealer reduction was working prior to the bailout as a long, slow, deliberative process… accelerating the shutdowns arbitrarily just as the OEMs were receiving billions for their failures will go down in history as one of the worst elements of the great auto bailout.”

    I agree, and I said so repeatedly at the time this was all going down. The dealership slaughters were the most misconceived and mishandled aspects of the Chrysler and GM restructurings. The main effect has been to reduce sales for both companies, particularly in smaller markets. Ford was the big winner out of that nonsense as it kept dealerships in many smaller markets whilst GM and/or Chrsyler left town.

  • avatar
    Glenn Mercer

    No one should take the following comment as a defense of the bailout-related dealer cuts on an ECONOMIC basis (I have my own views on that).  But I think a POLITICAL reason (again, that doesn’t mean it is a GOOD reason) why the cuts were bundled into the bailout was PERCEIVED equity of suffering.  In the bankruptcies the blue-collar OEM workers gave up (mostly future and some present) benefits and pay, the OEM white-collar workers took large layoffs, suppliers were already in the intensive-care ward, bondholders took a haircut, the taxpayer ponied up (with or without his or her consent) and I think part of the calculation was “The dealers have to share in the pain, too.”  Again, I am NOT saying this was a good idea or not, but I think there was a political as well as an economic line of argument here.  All that being said, I think if one totaled it all up I bet dealer employees were laid off in greater numbers than OEM employees during the downturn (counting not just bailout-mandated dealership closures but also plain ol’ recession-related layoffs at all brands, e.g. Toyota and Ford as well as GM and Chrysler).  This doesn’t get much press attention maybe because it is more visually compelling to show hundreds of people trudging out of a huge assembly plant than five people getting broomed from the local Honda store, but the job loss is just as real.

  • avatar
    view2share

    Within a 35 mile radius we now have two Hyundai dealerships, but only one Chrysler / Dodge, go figure.  Go another 100 some miles to find another Chrysler dealeship, I think, unless Lompoc has one, or another 135 miles or so from San Luis Obispo to find a Mitsubishi dealership ( rare cars i guess ).

  • avatar

    What a system  State owned car manufacturing State regultred dealerships next up will be law on which car you must buy and how often. The only one to get really screwed is the poor sod who is told to buy an Italian shit box Lada and can only find a Caddy.


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