By on May 27, 2011

About two months ago, we heard that Chrysler’s “prototype” Motor Village dealership in the Los Angeles area had been hit with a complaint [PDF] from the California New Car Dealer’s association, arguing that it violated state laws against manufacturer-owned dealerships. The store, a test bed for what Chrysler terms “new retail concepts,” is in fact a partnership between Chrysler and LaBrea ChryslerJeep, making it appear to fit a legal loophole allowing OEM partnerships in retail ventures. But the CNCDA argues that Chrysler is undercharging for rent on the dealership building which it owns, and according to Automotive News [sub], the California Department of Motor Vehicle’s New Motor Vehicle Board just voted unanimously to open a formal investigation into the situation. And the stakes couldn’t be much higher, as AN reports:

If the DMV finds that Chrysler violated state law, the automaker could have its business license in California suspended or revoked.

Ruh-Roh!

While suspension or revocation of Chrysler’s California business license would be a huge blow, it’s not clear how likely it is to happen. After all, the dealers who are suing Chrysler say they don’t want to put themselves out of business, and have obvious reasons for not doing so. Says Peter Welch, president of the CNDA:

From our perspective, there’s been a clear violation, and what I heard today underscored it. We obviously don’t want the department to close them down because that would adversely affect our 103 Chrysler dealers, but we can’t have rogue manufacturers not following the law and intentionally trying to circumvent it through sham devices to meet whatever the flavor-of-the-month new marketing strategy is.

But if you dig into the complaint, it’s not at all clear what the CNCDA wants, precisely. Here’s what the complaint requests:

Petitioner is not a licensee of DMV and does not request the Board to refer this matter to a gearing officer or attempt to mediate, arbitrate or otherwise resolve the matter because this Petition does not involve a dispute between Petitioner and Respondent. Rather, Petitioner requests the board itself, both public and dealer members, to exercise its statutory oversight responsibility by considering the herein described acts and practices of Respondent as they relate to the Legislature’s statutory scheme to ensure fair competition and protect the public. After careful consideration, Petitioner respectfully requests:

1. That the Board provide relief available under subdivisions (c)(1) and (c)(3) of Vehicle Code Section 3050 by directing DMV to conduct an investigation of the matters described herein and/or order the DMV to exercise its authority and power to initiate disciplinary proceedings against the motor manufacturer license of Chrysler Group LLC; and

2. For such further relief as the Board deems appropriate.

Turning to the California Vehicle Code, we find that the CNCDA invoked clauses one and three of the following “powers and duties” of the NMVB:

(1) Direct the department to conduct investigation of matters that the board deems reasonable, and make a written report on the results of the investigation to the board within the time specified by the board.

(2) Undertake to mediate, arbitrate, or otherwise resolve any honest difference of opinion or viewpoint existing between any member of the public and any new motor vehicle dealer, manufacturer, manufacturer branch, distributor branch, or representative.

(3) Order the department to exercise any and all authority or power that the department may have with respect to the issuance, renewal, refusal to renew, suspension, or revocation of the license of any new motor vehicle dealer, manufacturer, manufacturer branch, distributor, distributor branch, or representative as that license is required under Chapter 4 (commencing with Section 11700) of Division 5.

What does this tell us? Despite the CNCDA’s insistence that it doesn’t want Chrysler booted from the Golden State, it specifically chose not to invoke the clause intended to “resolve any honest difference of opinion or viewpoint.” Which, if this were a remotely amicable dispute, they would have, as Chrysler’s defense hinges on the exemptions for partnership and dealer training. And, reading through the CNCDA’s conclusions, it’s clear there’s something going on here besides one Chrysler-owned store. This conflict has historical context.

The past three years have been extremely challenging for California Chrysler dealers – more than 30 of them were forced to close their doors due to the collapse of Chrysler Financial and the recession. During that time, and additional 32 California Chrysler dealers were rejected and terminated by Chrysler LLC during its bankruptcy — but not Chrysler-owned LaBrea Avenue Motor Inc! … California’s remaining independently-owned and operated Chrysler, Dodge and Jeep dealers are fierce competitors but they cannot fairly compete against a Chrysler-owned dealership in their own backyard — especially a $30 million plus behemoth operating with little or no rent charge. The Legislature crafted a well thought out regulatory scheme to deal with unfair auto manufacturer competition and Respondent is apparently thumbing its nose at it.

So, this is part complaint, part payback. And remember, Chrysler dealer members of the CNCDA may want to prevent a suspension or revocation of Chrysler’s California business license, but there’s more to the CNCDA than just Chrysler dealers. Meanwhile, the matter is in the hands of the DMV board now… and we’ll be keeping an eye out for their investigation’s findings.

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30 Comments on “Could Chrysler Be Kicked Out Of California?...”


  • avatar
    Tosh

    So many big words for my aching brain!

  • avatar
    SVX pearlie

    If there’s any justice, the “trustworthy and fair” non-Chrysler dealers will take control of the complaint and use it to really put the screws to the Chrysler “competition”, forcing the choice between LOSING and DYING.

  • avatar
    Z71_Silvy

    Can we kick California out of the USA? They have overstayed their welcome.

    • 0 avatar
      johngalt

      Thanks Silvy. My laugh for the day.

    • 0 avatar
      John Horner

      California kicks about $50 Billion more into the US Treasury every year than comes back into the state, so kicking California out of the US might be good for California, but would be bad for perennial federal welfare states like Alaska. http://www.nemw.org/images/taxburd.pdf Set out on its own, California would be the world’s eighth largest economy.

      Major growth companies such as Apple, Facebook, Google and VWWare are all on a hiring binge in California. Now it is true that fast food giant wannabe Carl’s Jr. is talking about moving headquarter to Texas. Good luck to them with that. Texas is a leading state for obesity rates, so it might be a perfect fit.

      Meanwhile, back to the main subject: No, Chrysler is not going to stop doing business in California. It is the largest car and truck market in the country and the Chrysler dealers want to stop the company from any appearance of competing directly with them, but they certainly don’t want Chrysler to stop selling vehicles here. That would be more than a little counter productive.

      • 0 avatar
        M 1

        Yes in 2005, which is the source of your data. Let’s have a look at 2009. $346 billion in total federal spending (page 27, http://www.census.gov/prod/2010pubs/cffr-09.pdf), $267 billion in federal tax revenue (http://www.irs.gov/pub/irs-soi/09db05co.xls).

        But it’s a stupid topic either way.

  • avatar
    Sinistermisterman

    Oh for crying out loud. California is a friggin’ minefield of bureaucracy and red tape. Everywhere businesses of every level get shafted by the bloated public sector. Yes California – go ahead and screw Chrysler like you screw every other business within your borders. You’ll soon find they all move to Texas.

  • avatar

    What you all do not understand is that California IS the future. What ever happens in CA is adopted sooner or later all across USA and eventually across the world. If Californians tomorrow decide all get rid of cars and ride bicycles instead then after 5 years non-one in US will drive no stinking cars no more. May be except of Texas, but then Texas will be prosecuted by Federal Government and court will invalidate Texans right to follow different transportation rules than rest of country.

    Now imagine what will happen when Mexico finally takes back CA. Can you imagine how Mexico suddenly becomes most progressive country in the world and center of innovation and new technologies?

    • 0 avatar
      CarnotCycle

      The United States has several thousand thermonuclear weapons that obviate any ambition of Mexico getting California back, unless the trade is the rest of Mexico…lol. Besides, ‘Mexico’ as-in-not-run-by-the-Spanish was a thirty year fad as far as California goes, nothing more.

      The big question isn’t why California isn’t part of Mexico, but why Mexico isn’t part of the USA yet. After all, the USA kept California etc. in 1848, but it did give the rest of Mexico back. Har.

      • 0 avatar

        Guess what, Russia had more nuclear weapons than USA and now parts of Russia belong to Kazakhstan and Ukraine, including Baikonur Cosmodrom and all other parts which belonged to Russia for hundreds of years now are independent banana states. California originally belonged of Mexico. Majority of CA population will soon be Mexicans. They will elect government which may decide to join back Mexico and US can do nothing about it without being racists. Bunch of aged white guys unlikely to win war against much younger dynamic Mexican population. Nobody is going to use nuclear weapons against civilians and even freedom fighters.

    • 0 avatar
      wallstreet

      What makes you think Mexico prefers CA over TX?

      • 0 avatar

        It is easier kick out bunch of hippies and peaceniks than people with attitude and guns. What will happen in California – white people and businesses will gradually leave the state and Mexicans will gradually take over. These kind of things happen over period of time initially slowly and then suddenly turn into revolution. Most active people will simply leave CA and most who stay would be welfare recipients and public employees. I did not invent this things. Studies show the tendency of most of population being made of Mexicans and only in Silicon Valley there will be Asian majority. But will Asians stay in CA for long or eventually move out is hard to say. Americans did not want to live under British rule so why Mexicans may want to take orders from Washington DC and pay taxes to Federal government?

        BTW tech companies still may chose to stay in Silicon valley to enjoy nice weather and geography and wineries may be still in Napa but they will pay taxes to Mexican government and illegal immigration will not be issue anymore. Look at Baja California – not a bad place to live and many Americans choose to retire there and it is different from rest of Mexico.

    • 0 avatar
      obbop

      OLD saying is “As so goes California so does the rest of the USA in twenty years.”

      I fled (well, forced out for various reasons omitted here due to political correctness, volatility of the issues, so many USA citizens unaware of California realities due to the USA mass media omitting realities or altering them, etc. etc. etc.)

      In general… I fear for the USA’s future.

      I truly do.

      At several levels from what individuals will face and the country as a whole.

      “A house divided can not stand.”

      I have seen and lived within a house divided.

      Admittedly from a blue-collar working-poor class level.

      But, my time left is short, a few more years at most.

      I wonder how future writers/historians will explain the “new” USA?

  • avatar

    Hold up! How does TESLA not violate that “manufacturer owned dealership” law!? Are their dealerships dues-paying members of the NADA?

  • avatar
    lilpoindexter

    California is a great state, but it would be better without Chrysler…Hell the USA would be better without Chrysler…Chrysler was banned from selling cars in CA for a while because they were rolling back odometers.

    • 0 avatar
      windnsea00

      Wow, I never knew that. Found a quote: “1987 Dec 14, Chrysler pleaded no contest to federal charges of selling several thousand vehicles as new even though they’d been driven by employees with the odometer disconnected. ”
      (AP, 12/14/97)

      • 0 avatar
        golden2husky

        That was a big story back then. Chrysler had put out nationwide ads featuring Lee Iacocca talking about testing cars in the real world is good. Rolling back/disconnecting the odometer is not. It won’t ever happen again. Period. That was the official company statement on that. Lee had credibility back then, and the issue went away.

  • avatar
    AJ

    Why anyone wants to own and run a business anymore, you got me? You think it’s a crime or something… (sigh)

    • 0 avatar
      John Horner

      I own and operate a retail toy store business with three locations in California. Business is good, our customers are terrific, the weather is awesome and I enjoy my life very, very much. I’ve been doing this for about 12 years now.

      Prior to that I worked in four different technology companies, three based in California and one which had significant ties to California (including its major customer). I had an amazing amount of fun, worked with a lot of terrific people, and made a goodly bit of money along the way.

      California’s business climate has treated me very, very well.

      The whiners are mostly just that, whiners.

      • 0 avatar
        ihatetrees

        The whiners are mostly just that, whiners.

        OK, CA isn’t as bad as many on the right seem to think. I love the valley – I don’t think there’s a higher concentration of smart/interesting people anywhere in the world.

        But to ignore California’s many issues is borderline myopic. There are numerous respected tech firms that have publicly stated they won’t manufacture or do additional business in the state. That doesn’t equate to zero opportunity. But it does cast a cloud over the Rainbow And Unicorn Level of business happiness you imply.

      • 0 avatar
        John Horner

        I agree that California has issues which must be dealt with. Every other state does as well. Pick a state and I can give you a list of at least five serious problems it has not yet dealt well with.

        When some of my California friends reflexively bag on Texas I often jump to that state’s defense for some of the fine qualities it has and the things we all can learn from it. But, needless to say, Texas also has serious issues it isn’t dealing with.

        My point was to put some perspective and contrast up against the knee jerk hating on California I saw. Maybe my instinct comes from having grown up in New Jersey, a state which all the other state’s around it just love to bag on :).

  • avatar
    mcs

    No problem. I searched the CA Secretary of States records and Fiat America is still actively registered – number C0577024. It would be funny to see Marcionne to essentially flip the bird at the bureaucrats by selling Chryslers under Fiats business license. They could still be sold as Chryslers etc – just under Fiats license.

  • avatar
    CarnotCycle

    I don’t get why its illegal to sell your cars directly if you make them. Isn’t that a huge complaint with the car-buying public? The dark nexus between dealer and manufacturer, sometime several?

    Its like taking Apple down because they open retail outlets to sell Macs and iPhones ‘direct’ instead of through Best-Buy or the cellphone shack in the mall – middleman by fiat. It doesn’t make any rational sense.

  • avatar
    stevelovescars

    First, the New Motor Vehicle Board is made up of dealers and is intended to protect dealers, it’s not really an independent arm of the state.

    Second, It isn’t technically illegal for a manufacturer to sell cars directly to the public. The law protects franchised dealers, so if a manufacturer like Tesla, for example, never has any franchised dealers, they can skip the whole mess and sell them directly. I think nearly every state, if not all of them, have the exact same rules in place, including Texas. This isn’t a California problem except this is where the dealership in question happened to be placed.

    • 0 avatar
      John Horner

      +1

      • 0 avatar
        Diesel Fuel Only

        Also Agreed.

        Remember that one of the top benefits of the GM bankruptcy was to get around 50-state dealer franchise laws by being in Bankruptcy court because federal court orders supersede state laws.

        These bureaus are also a good repository of plush jobs for the relatives of well-connected peoples (IMHO).

        Also Agreed on California:

        Every place has its problems, I am in a low-reg., right-to-work state and I can tell you that there are big time problems all over the map: crime, crumbling infrastructure, legislature would rather beat on dead-horse social issues while streets are falling apart and university faculty are being laid-off left and right, etc.

        And no, this is not Florida.

        If CA got itself a unicamerial legislature that could take on the governor and the agencies on equal terms instead of a bi-cameral one that can’t even agree to disagree with itself, the state would take a quantum leap forward. Oh wait, most states would…

    • 0 avatar
      Scoutdude

      In WA it protects all franchised dealers from competition within a certain radius doesn’t matter if it’s a company or another franchisee. A few years ago a local Ford dealer purchased a lot across from the Ford store in the next town. They were selling used cars but I guess they intended to sell program cars too. Anyway the opened as XX Ford’s Used Cars and had Ford logos on some of their signs. Within a matter of weeks the signage was changed to remove the Ford and family name too.

  • avatar
    BCHoss

    Seems to me, the only people who have a problem with California are people who don’t live there.

    Why do we love to pick on each other? United we stand, my a$$.

  • avatar
    Mike Kelley

    Yeah, California businesses are going to get the higher electricity rates they have been clamoring for, too: http://www.uncoverage.net/2011/04/69-companies-leave-california-in-first-quarter-fastest-rate-ever/

  • avatar
    Diesel Fuel Only

    Fruits of the electric deregulation begun under Gov. Pete Wilson, I suppose.


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