The Truth About Cars » dealer cull The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Sun, 13 Jul 2014 04:03:09 +0000 en-US hourly 1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » dealer cull Chrysler’s California Dealer Battle: Wider War Already In Progress? Mon, 30 May 2011 15:28:19 +0000

It took a bit of research to fully parse the California New Car Dealer Association’s complaint against Chrysler and its partially company-owned store in Los Angeles, and our finding is that the CNCDA is actually gunning for Chrysler with gusto. But, argued some of the B&B, surely Chrysler doesn’t want to be kicked out of California? Surely Chrysler’s California dealers don’t want to see their manufacturer banned from selling vehicles in the state? Well, it turns out we were missing a little context that seems to indicate why Chrysler’s California dealers are willing to go to war over a single dealership: Chrysler is overhauling its California retail presence with the help of Wall Street hedge funds. Having used the bailout to wipe out 789 dealerships across the country, Chrysler appears to be working around franchise law to exert more control over its retail network in the Golden State. No wonder then that California’s dealers are standing together to attack Motor Village, the most egregious example of Chrysler’s new retail model. And there’s no knowing where the conflict could end…

Automotive News [sub] reports

California Superstores, a new dealership group owned largely by a New York hedge fund, is buying up former Chrysler Group dealerships and at least one existing store in California.

And Chrysler is buying the real estate for the group as a way to beat California’s high cost of real estate and to rebuild Chrysler’s weak market share in the state.

Here’s how it works: Chrysler Realty has been buying the expensive California real estate for California Superstores, a dealer group backed by York Capital Management, and renting it to the outfit for below-market rates.  Both sides fully admit to the situation, with Chrysler’s VP for Network and Fleet, Peter Grady telling AN [sub]

“We’re buying the real estate and York Capital is funding the dealership operations with working capital,” Grady told Automotive News. “We expect each one to sell 100 cars a month. That’s significant volume we’re missing. We’ve still got a long way to go in California.”

The plan will help ensure that Chrysler gets “the right guy to operate the store the way we want.”

Grady said Chrysler CEO Sergio Marchionne is a “huge, huge proponent of the plan.”

Note that getting “the right guy” is the key to this program… even though that money spent buying new real estate could just as well be used to renovated an improve the existing dealerships that Chrysler says are suffering from underinvestment. Meanwhile, on the other side of the deal, California Superstores managing partner Hoz de Vila admits

Chrysler Realty will give California Superstores a break on rent for the first couple of years. The rent amount will gradually increase to market rates, he said.

“It’s not really a rent subsidy. We’re still responsible for our leases. At the end of the day, [Chrysler Reality's] going to get their money back.”

This is essentially the same deal Chrysler has with the Motor Village dealership, with Chrysler Realty giving the new store six months free rent, and then increasing rates steadily until they reach $90,000 per month in 2015, for a retail location with a market rent level of $200,000. The major difference is that Motor Village is, in fact, owned by Chrysler. By contrast, the California Superstore locations are owned independently and backed by York Capital, with the founder of California’s largest Dodge dealer acting as CEO. On the other hand Chrysler’s funding of real-estate acquisitions is key to Superstores’ involvement, just as Chrysler’s desire to see “the right guy operate the store the way we want” is motivating this not inconsiderable outlay. In short, it’s one cozy little arrangement which appears to violate the spirit, if not the letter, of state franchise law.

Clearly, California’s Chrysler dealers want to use the most egregious example, Motor Village, to draw the line on Chrysler’s attempt to gain control over its California retail network. After all, the CNCDA’s complaint cites a number of improper filings with the state board, full Chrysler ownership under non-qualifying terms, and misrepresentation by Chrysler of the dealership’s status. But if the DMV throws the book at Motor Village, the California Superstores network could be the next target, as its relationship with Chrysler is clearly different than the typical franchised dealer. One California Chrysler dealer, speaking to AN under the condition of anonymity, argued

When they [Chrysler] have so much investment in it, our biggest concern is they’re not going to allow it to fail. They will do whatever, at the expense of other dealers, to allow them to survive.

CNCDA president Peter Welch adds:

I’ve heard concern from our members about Chrysler providing below-market rent subsidies to dealers and that it’s causing dissension among Chrysler dealers because they’re not all being offered the same types of incentives.

John Tangeman, Chrysler’s national dealership placement manager, insists that Chrysler has shared its lists of open points with its California dealers, arguing

We have opportunities in the market and we have offered and discussed these opportunities with a lot of dealers.

And, of course, Chrysler’s California dealers are not blameless in the sense that their statewide market share is a mere 5.9%, compared to a 9.5% nationwide average. And, argues California Superstore’s Hoz De Villa

A lot of operators were not reinvesting in the brand because of the financial conditions

So, Chrysler may just be doing what it has to after demoralizing its dealer network with subpar products and a painful, arbitrary, divisive dealer cull. On the other hand, given how blatantly it appears to be violating franchise law with Motor Village, it’s likely that Chrysler’s California situation could get a lot messier before it gets better. And, after all, a 5.9% market share and underinvesting dealers is still better than getting tossed from the country’s largest market for cars. Which, as this battle widens, is looking more and more possible.

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Chrysler Moves To Relocate Reinstated Dealers Wed, 29 Dec 2010 16:16:17 +0000

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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As GM’s Dealer Cull Wraps Up, Few Benefits Materialize Tue, 02 Nov 2010 15:45:04 +0000

As Automotive News [sub] reports, GM has gone ahead and finalized the 500 dealer cuts that made up its bankruptcy-bailout-era dealer cull, despite resistance from some 22 members of the US House of Representatives. And despite the congressional pressure, a damning SIGTARP report, and an ongoing criminal investigation, GM hasn’t changed its tune about cutting dealers, telling AN [sub] that delaying dealer cuts

would only divert our collective attention at a critical time and would ignore the independent decisions of arbitrators and individual settlement agreements between GM and its dealers

Meanwhile, just what affect has the dealer cull had on surviving dealerships? Are they thriving? Well, not exactly…

Automotive News [sub] looks into the performance of surviving dealers, and finds a decidedly mixed bag.

At Flemington (N.J.) Chevrolet-Buick-GMC-Cadillac, General Manager Jeff Parker says service revenue is up 5 percent this year, in part because of referrals from a wind-down Chevrolet dealership 25 minutes away that closed in June…. Parker says that though his Flemington dealership has seen additional service work, he hasn’t seen an increase in new- and used-vehicle sales from the closing of Malek Chevrolet in Hopewell, N.J. He says he is concerned that those customers are looking at non-GM brands…

…Several GM dealers last week reported only a trickle of new business as a result of the wind-downs.On the other hand, some dealerships report a healthy increase in sales.

Of course, some dealers are seeing upticks in sales as a result of other dealer closures, but they tend to be in less-densely populated areas.

Bennett Motor Co., a Chevrolet-Buick store in Cheraw, S.C., has seen a 20 percent uptick in new- and used-car sales since its two largest GM competitors in rural Chesterfield County were wound down by GM, says General Manager Vic Gardner.

He expects his store will sell just over 100 new vehicles this year.

“We’re the only franchise Chevrolet dealer now in the entire county,” says Gardner, whose store is about 70 miles southeast of Charlotte, N.C.

Meanwhile, GM itself has admitted to the SIGTARP and congress that it expects no actual savings from its dealer cull. GM insists that fewer dealers is helping dealership profitability, but admits that improved products and an economic upswing is probably doing more. Meanwhile, GM’s overall sales are up only six percent compared to the ten percent increase enjoyed by the overall market. As long as GM’s sales underperform the market, culled dealers will question the wisdom of the sales channel blood-letting, but the real issue is the SIGTARP’s pending investigation. This story isn’t over by a long shot…

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Ohio Reps Request Halt To GM Dealer Closures, GM Declines Mon, 25 Oct 2010 20:07:06 +0000

Ohio Republican Reps LaTourette and Boehner have officially requested that President Obama suspend GM’s dealer wind-down agreements until the Special Inspector General for TARP (SIGTARP) completes an investigation of the government-approved GM and Chrysler dealer culls. The representatives focused on the fact that SIGTARP’s initial report on the dealer cull, which had criticism for GM, Chrysler and the government task force, wasn’t publicized until after arbitration for culled dealers ended. WKYC quotes the representatives’ statement as saying

There is too much at stake to proceed in an atmosphere where dealers were denied so much crucial information in a process rife with secrecy. As the findings of this investigation may shed much needed light on the proceedings affecting hundreds of dealerships nationwide, we believe it is necessary to thoroughly analyze its results before continuing with the closures of hundreds of dealerships, and the potential loss of thousands of jobs.

And Republicans aren’t alone in urging a halt to wind-down proceedings pending the SIGTARP’s latest investigation… Democrat Dennis Kucinich has already staked out the position now occupied by the House Republican leader. And did the artist sometimes known as “Government Motors” blink in the face of bipartisan pressure?

Not so much. GM’s Greg Martin tells the Detroit News

GM has no plans to extend the wind-down agreements’ deadlines with dealers. GM and its dealers have made significant progress over the last several months with a clear focus on selling great cars and trucks and providing a superior retail experience. An extension would only divert our collective attention at a critical time and would ignore the independent decisions of arbitrators and individual settlement agreements between GM and its dealers.
Clearly telling Ray LaHood where to stick it has had a salutary effect on GM’s relationship with its 60 percent owner. And hey, what has the government done for The General lately? Seriously though, with an IPO looming, an unfavorable finding in the SIGTARP’s investigation could be a huge blow for GM. And though maintaining focus is a skill GM should be encouraged to pursue, it’s hard to see why the wind-down couldn’t be put on hold until the investigation clears. Especially considering the initial SIGTARP report made it clear that GM was inconsistently enforcing closure rules, and that despite not costing the Detroit automakers “one damn cent” in the words of one GM official, the auto task force decided that not culling dealers would be “inconsistent with the President’s mandate for shared sacrifice.” Given this background, and considering the direction of the political breezes, GM might want to consider hedging its bets and waiting for the SIGTARP investigation to wind up before moving forward with its wind-downs
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SIGTARP Investigates Possible Criminal Activity In Dealer Cull Fri, 15 Oct 2010 14:59:13 +0000

Back in July, the Special Inspector General for the TARP program (SIGTARP) released a damning report on GM and Chrysler’s efforts to cull dealers during their government-overseen bailout-bankruptcies. The upshot: GM and Chrysler handled the culls either inconsistently or subjectively, and the President’s auto task force pressed the issue unnecessarily and “without sufficient consideration of the decisions’ broader economic impact.” And though that report, the product of a year’s worth of investigation, made the automakers and their government “saviors” look mighty stupid, the awkward walk-back of most of the dealer cuts had already made the point fairly well. But with the TARP program now largely rolled up, the SIGTARP’s office has been bulking up on investigators, targeting fraud and criminal activity around the entire TARP program. And, according to Automotive News [sub], the dealer cull is on the agenda. SIGTARP won’t “disclose the targets of the investigation or the actions being probed,” but it has “opened a follow-up investigation of possibly illegal activity in the [dealer-cull] effort.”

There are plenty of possible targets… especially if you ask aggrieved former dealers. Some point to holes in GM’s documentation of dealer cull decision making. Some point to “false statements” in congressional testimony by GM’s Fritz Henderson, Chrysler’s Jim Press and others, especially in regards to the claimed cost savings of cutting dealers (an issue the SIGTARP report tackled specifically). Others point to a seemingly endless list of possible “inside deals” in which struggling but well-connected dealers were spared at the expense of profitable dealerships. Wherever SIGTARP comes down on possible illegal activity in the dealer cull, it’s good to know that more light is being cast on that murky and controversial chapter in the great Detroit rescue.

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Canadian Judge: Forget Arbitration, Culled Dealers Can Sue GM Fri, 23 Apr 2010 22:24:41 +0000

Automotive News [sub] reports that 19 rejected Canadian GM dealers have been given the green light to sue GM as a class, rather than go through the arbitration process that is being used to resolve dealer cull disputes in the US. The dealers are suing GM for breach of their dealer agreements, and for failing to provide compensation beyond wind-down costs. They argue that the arbitration process would be expensive for dealers, non-transparent to the taxpayers who funded GM’s reorganization, and would put GM at an unfair advantage.

One dealer explains:

For GM it would have been divide and conquer and control the flow of information.

Superior Court Judge Sarah Pepall agreed, ruling that the dealers have a common cause against GM and should be able to pursue their claims jointly in public court. Another lawsuit by Canadian GM dealers, naming both General Motors and its Canadian counsel, and alleging misconduct in the execution of the Canadian dealer cull is still pending. The very public drama between GM and its dealers that began with its bankruptcy-era cull of 1,573 dealerships may be nearly a year old now, but it’s showing few signs of stopping any time soon.

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Chrysler Gets Down With The Dealers Mon, 29 Mar 2010 22:11:37 +0000

Chrysler’s awkward, year-long fandango with unwanted dealers is poignantly encapsulated in a strange little anecdote hidden in the back of today’s Automotive News [sub]. Headlined, “Rejected-store worker’s chat with Sergio was just smoke,” the piece told of a chance encounter several weeks ago between Fiat/Chrysler CEO Sergio Marchionne and culled dealer Jim Casper, while enjoying a smoke at a seafood restaurant bar.

“Are you a rejected dealer?” Marchionne asked [after Casper introduced himself].

“I work for a rejected dealer,” Casper replied.

“Do you know why you were rejected?” the CEO asked.

“To be honest, sir, we have absolutely no idea,” Casper said.

Now why would Sergio guess that Casper was with a “rejected dealer,” a term used by dealers protesting Chrysler on Youtube? It could have been awkward if Casper were just a good soldier looking for a pat on the back from his CEO. Actually, on second though, it couldn’t have been any more awkward than what (apparently) actually happened.

Casper asked Marchionne if he had received the two letters his father-in-law, the culled dealership’s owner, had sent. As AN [sub]tells it:

One letter asked Chrysler to consider restoring the store’s franchises if the company were to open new points in the area. A second letter asked the automaker to refrain from appointing a new dealer in Mealey’s territory until Mealey’s arbitration was complete.

“Jim, I don’t recall,” Marchionne said. “But I open everything that’s addressed to me.”

Casper followed up the next day with an e-mail thanking Marchionne and attaching the two letters in case the CEO couldn’t find them. The e-mail also invited Marchionne to call him.

Casper never heard from Marchionne, just as his family never got a response to the two earlier letters.

But Casper’s lawyer got a message from a Chrysler lawyer.

“Chrysler Group believes that communications about the case ought to be between counsel,” the March 19 e-mail said, according to a copy provided by Casper. “Please ask your clients not to send such communications to Mr. Marchionne or any other Chrysler personnel. Chrysler Group is not in a position at this time to make the call [to Marchionne] that your clients suggest.”

Burn! That’s what they call “getting Darvished” in Auburn Hills. But this isn’t just a sad story about an awkward encounter. Thanks to Automotive News [sub]‘s decision to splash the headline “Chrysler shifts tone on dealers” across its front page, there’s ironic counterpoint as well. Though Chrysler has offered to reinstate 50 dealers and is talking to more (Casper’s 2,000-unit-per-year shop not included), other dealers and their lawyers are saying things like
Chrysler continues to resist and contest each and every step in arbitration

The recent discovery fights, confidentiality disagreements, and other joys of litigation may be new, but the tone sounds mighty familiar. And with sales stagnant and an incentive battle underway, Chrysler needs dealers on its side. Maybe the next time a dealer intrudes on his hard-earned bar time, Sergio will at least offer to buy the guy a drink.

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Quote Of The Day: Live By The Politics, Die By The Politics Edition Tue, 16 Mar 2010 21:45:07 +0000

Chrysler Group understands that the practice at this time may be a cause of concern among policymakers and among arbitrating dealers. As a measure of good faith, Chrysler Group will not proceed with network actions that directly impact an arbitrating dealer until the arbitrator has had a chance to rule in that case.

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GM Dealer Reinstatement Puts Pressure On Chrysler Wed, 10 Mar 2010 17:44:40 +0000

GM’s recent reinstatement of 661 culled dealers has put pressure back on Chrysler to come to arrangement with the dealers it shed during last year’s bankruptcy and bailout. Rep. Chris VanHollen, the sixth ranking Democrat in the House or Representatives, tells Automotive News [sub] that with GM buckling to dealer pressure, the time has come for Chrysler to follow suit. “There’s no quicker or easier way to build this network than to reinstate its terminated car dealerships,” says VanHollen, who drafted much of congress’s dealer arbitration legislation. The Committee to Restore Dealer Rights contacted Chrysler CEO Sergio Marchionne “to discuss the reinstatement of the rejected dealers who had their franchises so abruptly taken and were unfairly terminated.” The response?

We believe that all communications concerning the subject matter of the arbitration should be between counsel and request that your clients follow this procedure in the future. Please ask them not to send such communications to Mr. Marchionne or any other Chrysler personnel.

Oh snap! Chrysler isn’t going down without a fight… even if that means taking on the representatives who have oversight of the government’s eight percent stake in the automaker.

GM’s justification for reinstating dealers was that Chairman and CEO Ed Whitacre wanted more sales volume at all costs, a goal that should probably resonate with Chrysler, considering the firm’s terminally moribund sales. But apparently Chrysler would rather pick a political fight to axe its old dealers.

Chrysler’s argument: unlike GM, which gave its dealers time to wind down their operations, Chrysler made its dealer cull effective upon exiting bankruptcy. As a result, the New, New Chrysler is able to make the argument that technically these dealers have never had a franchise agreement with the company in its current form. You can’t legally reinstate something you never had a contract with,” anonymous Chrysler sources tell Automotive News [sub]. “Dealer appointments will be a function of the arbitrations.”

Culled dealers aren’t buying it though. “Chrysler’s looking for technicalities to hide behind,” says Alan Spitzer of the CtRDR. “The law allows them to negotiate outside arbitration.” Interestingly, both GM and Chrysler have dropped their campaigns against a Colorado dealer reinstatement bill.

Meanwhile, Chrysler Canada dealers are eying Chrysler’s reborn Five Star incentives with envy [via The Windsor Star], as apparently the mothership has seen fit to not include Canadian dealers in the program.With dealer-related challenges at every turn, Chrysler’s “transition year” is going to be even more fraught with difficulties than we had initially thought.

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GM Fighting Colorado Culled-Dealer Bill Sun, 21 Feb 2010 17:13:55 +0000

The Colorado House’s passage of HB-1049 [PDF here], a bill requiring restitution for dealers culled during the Chrysler and GM bankruptcies, has drawn a $60,000 “no” campaign from General Motors. The Denver Post reports that GM’s ad campaign, which features lines like “we must keep driving forward to repay our government loans,” and “don’t let special interests stick taxpayers in reverse,” has riled up local lawmakers more than ever, drawing such timeless put-downs as: “they must be spending tax dollars on Botox to say that with a straight face.” The bill would require OEMs compensate culled dealers for signs, parts, dealer upgrades and more, as well as offer them the right of first refusal for any new area dealerships.

Arbitration between culled dealers and GM and Chrysler is ongoing, having been mandated by congress, and it’s already creating friction, particularly for Chrysler. But federally-mandated arbitration will only accomplish so much, if states like Colorado continue to push back for local culled dealers. Dealers are protected on the state level by franchise laws that vary significantly from state to state, and if local legislators (who are much more easily persuaded by the pleas and donations of local dealers) dig in and fight, GM and Chrysler’s dealer culls could become hopelessly mired in the kind of compensation negotiations that collectively earned Oldsmobile dealers about $1b when that brand and its dealers were wound down.

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Would You Trade Places With A Chrysler Dealer? Mon, 15 Feb 2010 20:59:57 +0000

It’s not a question that should leave many folks on the fence, but apparently there are at least a few Detroit-area journalists who might be willing to consider the career change. “Dealers optimistic about Chrysler’s future” proclaims the Detroit News headline from NADA’s annual convention. A more accurate headline (such as USAToday‘s “Chrysler dealers face new-model drought”) probably should have included the term “punch-drunk” to better explain this unexpectedly sunny outlook. One grizzled ChryCo dealer sums up the mood with aplomb:

We’re the toughest fighters. We’ve always been 3 or 4 (in the marketplace). We’ve never been spoon-fed. We have to fight for every piece of ground… There’s light at the end of the tunnel; I just don’t like the length of the tunnel.

Bizarrely (or, for those familiar with the dynamics of Detroit’s media, not), The Freep’s Mark Phelan dons his Pollyanna chapeau and goes for broke with the headline “Chrysler has lots of products to crow about.” Because the “game of survival” claptrap you hear from the people who actually have to sell Chryslers is just so much bellyaching. Phelan kicks off with a plea to “stop shoveling dirt onto Chrysler’s grave for a moment” (not bloody likely, mate), and then breaks into some prose that would be tough to describe as anything other than advertising copy.

SUVs became emblematic of Detroit’s dysfunction, but there’s still a market for them, and the new Grand Cherokee looks like a winner. Its elegant looks sheath a classy interior and the go-anywhere ability that make Jeep one of the auto industry’s strongest brands.

A brand-new seven-seat crossover SUV for Dodge — the brand’s first vehicle in the popular segment dominated by models like the Toyota Highlander and Chevrolet Traverse — is to follow the Grand Cherokee out of Chrysler’s plant off Jefferson Avenue in Detroit in the third or fourth quarter of this year.

At about the same time, dynamic new versions of the exciting Chrysler 300 and Dodge Charger sedans are to arrive in dealerships.

Get the picture? This is a lot of faith in Cerberus-era products for a guy who just 15 short months ago said:

Cerberus’ ownership of Chrysler is a strip-and-flip operation. Chrysler’s leaders spent much of the nine years they were part of DaimlerChrysler approving vehicles that didn’t stand a chance in the market.

And yet the last of the Cerberus-developed models, which first appeared in Chrysler’s laughed-out-of-Washington viability plan, are somehow worth breaking out the ad copy thesaurus for? One wonders what Phelan thinks of the widely reported sense of relief at the NADA conference that Chrysler would not be pushing extra inventory as they did last year.

In any case, product is only one of many major issues facing Chrysler’s dealer body. The ongoing arbitration aimed at bringing justice to Chrysler’s bankruptcy-era dealer cull is dragging on, while the critics of the cull like AutoNation CEO Mike Jackson blast ChryCo inpublications like Automotive News [sub]:

Chrysler went first, and I think they did a terrible job. Why they took out any rural small-town dealers, I don’t know. It’s a strength for them. Blows my mind.

But Chrysler must have a fairly different take on the importance of culled dealers, as it has resisted arbitration since the idea first came up in congress. Most recently, Chrysler reserved the right to challenge arbitration legislation in a letter to dealers, prompting Rep. Chris Van Hollen to lay into the Pentastar-crossed automaker:

Chrysler’s suggestion that they may now challenge this legislation is very troubling and will do nothing to help turn the struggling car maker around. It is my hope that Chrysler will allow the arbitration process to play itself out and abide by the outcome of these deliberations.

Meanwhile, with product and dealer relations in trouble, finance is forming the third leg of Chrysler’s stool of misery. With GMAC pushing for more lease marketing, dealers are reporting that this is not the road to salvation (go figure). One dealer explains to USA Today:

They drop cars off lease and they’re gone. We lose these people. That will hurt once the new product starts to flow again. They’re leaving us in droves.

But then the government has already backed GMAC and Chrysler in hopes of somehow rescuing both. If GMAC needs to push leases, it will be hard for Chrysler to say no. Chrysler’s dealers, meanwhile, are long used to not having the option either way.

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1,550 Culled Dealers Filed For Arbitration Fri, 29 Jan 2010 15:58:21 +0000

About half of all dealers culled in the GM and Chrysler bankruptcies have filed for congressionally-mandated arbitration, reports Automotive News [sub]. 409 of the 789 culled Chrysler dealers and over 1,000 of the 2,000 culled GM dealers have paid the $1,625 to file for arbitration, and will move into the next phase of the process: agreeing on an arbitrator. Having threatened to sabotage the process with a lawsuit on constitutional grounds, it’s a bit of a surprise to see Chrysler suddenly validating the arbitration process,but that’s what appears to be taking place. Chrysler tells AN [sub]:

The company looks forward to the expeditious completion of the process. A robust dealer network is a critical component of the group’s strategy of rebuilding a strong and resilient American automaker

Representatives of the culled dealers are optimistic that many could be reinstated when arbitration wraps up in June, but only if Chrysler continues to approach the arbitration process with an open mind. Whether that happens or not will be clear as the process goes on.

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Culled Dealers: Today Is The Last Day To Stick It To GM and Chrysler Mon, 25 Jan 2010 16:22:36 +0000

The deadline for culled dealers to apply for congressionally-mandated arbitration is midnight tonight, so if you lost your Chrysler or GM dealership in last year’s bankruptcy cull, you’d best get cracking. The Detroit News reports that at least 1,200 of the roughly 3,000 culled dealers had applied for arbitration, according to the American Arbitration Association. That number is expected to creep rise even higher by the time the deadline expires. Many observers had expected arbitration applications to be much lower, as GM and Chrysler had dragged out the proceedings, forcing many dealers to shutter their shops. GM has already reversed the closure of 80 dealers and Chariman/CEO Ed Whitacre has said he expects “hundreds” more to be reinstated in arbitration. Chrysler continues to take a hard line on the issue, a stance that is sure to make its arbitration proceedings considerably more tense.

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200 Canadian GM Dealers File $750m Class-Action Suit Over Dealer Cull Fri, 22 Jan 2010 01:37:48 +0000

The Globe and Mail reports that Toronto-based Trillium Motor World has filed a $750m class action suit on behalf of 215 culled Canadian GM dealers. The suit names General Motors and, in an interesting twist, its law firm Cassels Brock & Blackwell LLP. According to a suit’s statement of claim, Cassels Brock was representing Canada’s federal government in bailout talks with GM at the same time as it was representing the Canadian Automobile Dealers Association, a relationship it never disclosed to the dealers. Conflict of interest much?

According to the G&M:

GM Canada sent e-mail notices to the dealers on May 20 and gave them until May 26 to respond to a compensation offer. The suit says GM warned dealers that “there was a ‘strong possibility’ that GM would file for reorganization under the Companies’ Creditors Arrangement Act.”

GM Canada did not file for protection under the CCAA, but the suit says the company did not offer any dealers who signed the wind-down agreement the option of changing their minds.

The suit accuses the auto maker of adopting “a ‘shock and awe’ strategy giving the affected dealers no more than a few days to come to grips with what they were facing, organize themselves and obtain effective legal representation on the WDA.”

This combined with allegations against Cassels Brock combine for a potent combination. More from Reuters.

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Quote Of The Day: Chry The Beloved Automaker Edition Thu, 14 Jan 2010 00:55:23 +0000 Sympathy for the devil? (

Chrysler may file a suit challenging the congressionally mandated dealer cull arbitration, reveals CEO Sergio Marchionne to Automotive News [sub].Why? Because it’s just not fair that dealers pressured congress to give them a fair shake. Wounded by the arbitrary backlash against his arbitrary cull, Marchionne threw his head back and cried unto the heavens:

Ask me what fairness is involved in all this. Why doesn’t anyone ask what’s fair to Chrysler?

Can’t Chrysler just catch a break? Besides the $14b in TARP money, the re-writing of bankruptcy law to secure it the best possible deal at the expense of “secured” lenders, the $1.5b rescue of its finance arm and unwarranted endorsements from government officials, Chrysler hasn’t received so much as a kind word from anyone. Worse still, Marchionne only got the whole re-financed, re-organized company for no money.

When Lord? When is it going to be Sergio’s time?

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Whitacre: “Hundreds” Of Dealers Could Be Reinstated Thu, 07 Jan 2010 05:29:31 +0000 The straight shooter meets the gang who couldn't shoot straight.

GM’s CEO and Chairman Whitacre gave Automotive News [sub] some choice nuggets of quote today. Addressing almost everything except his firm’s stagnant sales, Whitacre took on some of GM’s most staggering challenges in the most… folksy tone imaginable. Mr Whitacre, your explanation of GM’s bankruptcy dealer cull if you please:

The way it came out, if you fell above or below a line, you were removed. But you had to do it that way. You can’t just go around flipping coins, so you had to have a process.

Ok, take a minute to wrestle with that one. Then hit the jump.

Mr Whitacre, do you have misgivings about dealer arbitration? Could it be that the legislated arbitration is less of an improvement on coin-flipping than GM’s process?

I think a large number will get reinstated. I think that’s a given. It’s in the hundreds…. The bad thing would be if they’re a lousy dealer that has a lousy storefront and through some process they’re put back in arbitrarily. If they’re a good dealer and would really push GM in a classy manner, like we want it done, then it would be really good.

“Push GM in a classy manner.” You know, walk the nuanced and mutually-beneficial line GM walks with its potential (or not) customers. Having a hard time with the whole “classy” concept? Just think WWHLD? (What Would Howie Long Do?).

But CEO/Chairmen don’t need to be details people. After all, Big Ed has the vision thing for 2010: Profit. And despite having the highest incentives in the business, he really thinks it’s in the cards this year.

You want to be a profitable company, and I think everything else just sort of flows from that — numbers of vehicles, how many fleet, how many in retail. We’ve kind of restructured, put our priorities in the right place

Forget jumping the shark, the big moment for a GM CEO is when he goes down the rabbit hole. This may have been Ed Whitacre’s big moment.

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Culled Dealers “Win,” Don’t Stop Whining Thu, 10 Dec 2009 22:33:04 +0000

If you haven’t been following the drama surrounding the effort to restore dealers culled during GM and Chrysler’s bankruptcy, you might need to be brought up to speed. In essence both the cut dealers and the automakers have agreed to send create an arbitration process by which dealers could have the decision to cut their franchise reviewed by a neutral third party. The remaining conflict is over the criteria arbitrators should use to judge dealer viability, as the GM and Chrysler proposition would have forced arbitrators to use the same criteria GM and Chrysler did in the initial cuts. That would obviously have yielded the same results as the initial cull, so the dealers pushed for a set of criteria that is more favorable to their interests. Automotive News [sub] reports that a compromise has been reached in conference committee that would allow dealers to present “any relevant information” to make their case. That bill is now been approved by the House [sub] and is headed to the Senate, where its passage is “virtually assured.” But despite having all but guaranteed an independent review, culled dealers still aren’t happy.

One former owner of an allegedly profitable Chrysler dealership tells BNet:

At this point, I don’t even want my franchise back. I can’t afford to risk my financial future with Chrysler again, like my family did before. What would help me would be some financial restitution. The comparison is, it’s as if somebody broke into your house and then they call you and say, ‘We have all your stuff, you want to buy it back?’ It just doesn’t work that way. They took everything I would use to buy it back

Dealers speaking to the WSJ confirm the message: they don’t want their franchises restored, let alone a review process to possibly reinstate said franchises. Most have been out of business too long, and with the car market still struggling (especially for GM and Chrysler products), few see smooth sailing ahead as reinstated dealers. And with unilateral reinstatement legislation off the table, they’ve got nothing to threaten GM and Chrysler with for financial compensation.

To say that nobody is truly happy with the results of the auto bailout is an understatement. The culled dealers may have taken a harder hit than most, but there’s clearly no desire to make them whole. And honestly, it’s a little surprising that more dealers weren’t cut. Time to man up and open a Kia dealership.

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Culled Dealers Dig In Over Deal Tue, 08 Dec 2009 18:06:35 +0000 GOP Rep. Steve LaTourette and local auto dealer Alan Spitzer ( soon as GM and Chrysler agreed to review their dealer cull decisions, the culled dealers in question began complaining that the review would not improve their situations. According to the aggrieved dealers, the new review would be based on the same allegedly flawed data as the initial cull, meaning nothing would be changed. By GM’s own admission, only 39-51 of the over 1,000 dealers cut would even stand a chance at reinstatement. Now, Automotive News [sub] reports that a new measure has passed the House of Representatives which would allow dealers to “present any kind of relevant information during the arbitration.” The measure comes in the form of an amendment to the House Financial Services bill, which is headed to a conference committee in which House and Senate leaders must arrive at a compromise in order to send the bill to President Obama.

The National Automotive Dealer Association had criticized the GM and Chrysler review process, saying:

NADA appreciates the good faith and constructive dialogue we have had with GM as we try to build a consensus to ensure that GM and its dealer network are as successful as possible. GM’s announced plan to address the issue of dealership closings is a positive step, but we do not believe it establishes a sufficiently meaningful process that provides for a reasonable opportunity for dealer reinstatement.

But strangely, the passage of this revision has not drawn NADA’s unqualified support:

NADA supports this approach unless GM and Chrysler agree to an alternative that addresses dealer concerns. The revised amendment would give affected dealers transparency and the right to arbitrate. The arbitrator would balance the interests of the dealer, the manufacturer and the general public. Regrettably, the revised amendment would not provide compensation for affected dealers.

The revised LaTourette amendment is part of the final negotiations on a year-end spending bill necessary to keep the government operating. These leadership-driven negotiations on the broader bill will occur during the next few days. The language could be accepted, rejected or modified. NADA is working aggressively with all parties to achieve a meaningful opportunity for dealer reinstatements.

The Detroit News reports that another round of meetings between GM, Chrysler and their culled dealers is under way. The battle continues…

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GM, Chrysler Agree To Reconsider Dealer Cull Thu, 03 Dec 2009 22:17:32 +0000 ( to legislative pressure, GM and Chrysler have announced today that they will initiate reviews of the dealer cull undertaken during bankruptcy. GM is announcing a “Comprehensive Plan To Address Dealer Concerns,” while Chrysler characterizes its agreement as a “Binding Independent Review Process for Discontinued Dealers.” Both firms take pains to thank Senator Dick Durban and Rep Steny Hoyer for their leadership in preparing the non-legislative conclusion of months of bitter acrimony. Culled GM and Chrysler dealers, you know who to make your campaign donations to… unless you’re a member of the dissident group the Committee To Restore Dealer Rights. According to Automotive News [sub], the group says the new plans will only allow “between 39 and 51″ culled GM dealers to be reinstated. “The GM proposal guarantees that they would win every arbitration,” says one member of the committee, who alleges that the new process is based on the same allegedly flawed data the initial cull was based on. Hit the jump for the plan outlines.

GM’s plan includes:

  • A commitment to advise all Chevrolet, Buick, GMC and Cadillac dealerships that received a complete wind-down agreement of the criteria used by GM in the selection of that dealership for wind-down.
  • A face-to-face review process for all complete wind-down dealers who have not already terminated their dealer sales and service agreements with GM.
  • If the complete wind-down dealer is not satisfied with the outcome of the face-to-face review process, he or she may elect to proceed to binding arbitration. The arbitration will expressly be limited to whether GM selected the dealer to receive the wind-down agreement on the basis of its business criteria.

Additional components include:

  • Accelerated wind-down payments to dealers consistent with the terms of their wind-down agreements.
  • A process to resolve open issues identified by dealers related to the operation of wind-down dealers.
  • Agreement to support public policy issues of mutual interest identified by dealers.
  • Agreement to work with appropriate policy makers regarding floor-plan and other financing issues that are important to dealers.
  • Additional evaluation in limited circumstances for complete wind-down dealers who purchased stock, land or dealerships from GM in the last four years.
  • Reaffirmation of GM’s long-standing commitment to try to increase the diversity of its dealer body.
  • In the limited circumstances where there are dealer re-establishments, area wind-down dealers will be given the opportunity to submit a proposal.
  • Market reevaluation to ensure GM has sufficient dealer representation across the country.
  • Placement assistance for service technicians and other dealership employees.

Chrysler’s plan includes:

  • Transparency on Chrysler’s initial dealer determinations through face-to-face meetings with Chrysler executives
  • A binding review of those determinations by an independent 3-person panel
  • An opportunity to join the new dealer network if that independent review panel rules in the discontinued dealer’s favor

The fundamental elements of the appeal process include the following:

  • Provide each discontinued dealer the general criteria and standards used by the former Chrysler LLC in making its rejection decisions and the specific criteria considered and applied to the individual discontinued dealer’s circumstances
  • Offer of a meeting with the discontinued dealer’s former Business Center to discuss the criteria, and ability for the dealer to present information to refute the rejection decision
  • Right to call for a binding independent review if dealer believes its rejection was not warranted. Chrysler will abide by the decision of the independent review panel
  • Two opportunities to join the new dealer network if the panel rules in the discontinued dealer’s favor: first, to join the new network as a Genesis (Chrysler, Jeep® and Dodge) dealer in the previous market area or, if that is not possible, to be offered an opportunity to open a Genesis dealership in another market area from a list of available market areas
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Canadian GM Dealers Sue GM Mon, 30 Nov 2009 15:45:14 +0000 (

North of your border (not mine), GM dealers are slightly annoyed. In fact, they’re fuming. reports that Bob Slessor, owner of a dealership for GM has sued the firm after he was informed that his dealership would be closed before the end of 2009. And don’t think he’s the only one, 12 dealers are submitting multi million dollar lawsuits against the automotive arm of the U.S government. The lawsuits hinge on the way GM approached these dealer closures. Bob Slessor claim that GM used “high handed and oppressive” tactics. The plaintiffs are looking for a permanent injunction against their terminations and $1.5 million in punitive damages. The report didn’t state whether that figure was in U.S or Canadian dollars.

The statement to the court read “GM deliberately created an atmosphere of fear and oppression and denied the plaintiffs the opportunity to receive fair and meaningful legal advice and financial consultation to permit them to evaluate the purported termination”, but this still has yet to be proved by the plaintiffs. The claim continues “to the knowledge of GM, in every case, after payment of employee severance and other necessary close-down costs, the sum offered by GM provided no compensation at all to the plaintiffs”. Naturally, GM hasn’t commented on the case. GM spokesperson Tony LaRocca was quoted as saying, “We don’t comment on matters before the court.”.

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Dealer Cull Fallout Swirls Mon, 23 Nov 2009 23:00:12 +0000 Love, it seems, is the only thing that hasn't been lost (courtesy:WSJ)

As congress nears the end of the 2009 legislative session, culled GM and Chrysler dealers are pushing hard for the rapid passage of the Automobile Dealer Economic Rights Restoration Act. Meanwhile, nearly two dozen members of the Senate Commerce Committee from both parties are calling on GM and Chrysler to resolve outstanding disputes with culled dealers in hopes of defusing the situation by non-legislative means.

Given the federal government’s ownership stake in Chrysler and GM, it is our shared obligation to ensure all impacted dealers are treated as fairly as possible. We continue to urge you to take all actions necessary to uphold the assurances you provided earlier, as well as to achieve a mutually agreeable and timely outcome to the negotiations between Chrysler, GM and the dealers.  Chrysler and GM’s unprecedented bankruptcy has greatly impacted dealers, consumers, employees, small businesses, and communities across the country. It is crucial that outstanding issues be resolved as expeditiously and efficiently as possible to provide the least amount of hardship to Chrysler, GM and the dealers.

GM’s response to the senatorial call out? “Those discussions are still underway,” according to spokespeople, who refused to characterize the discussions for Reuters. Meanwhile, two examples of possible mitigating action by GM and Chrysler are not off to good starts.

GM’s immediate solution to the situation appears to be to ignore the dealers and reach out to those dealers’ customers. According to Automotive News [sub], GM is offering free tire rotation and 45-day discounts of $1k-$2k per vehicle to 950,000 customers of the company’s closed dealerships. According to a letter to dealers obtained by AN [sub], the incentive amount depends on the “likelihood to purchase a GM vehicle and the relative distance to the next closest dealer.” A second wave of the program targeting Saturn customers is planned for next year, say GM spokesfolks, but the first round isn’t exactly doing much to smooth things over for the culled dealers. This is an inappropriate time to take such an aggressive measure,” Tamara Darvish of the Committee to Restore Dealer Rights tells AN [sub]. “If in fact dealer rights are to be restored, why would GM go in and move all those customers?” Probably because GM has no intention of restoring culled dealers, and is guessing that the ADERRA won’t be passed.

Meanwhile, Chrysler’s dealer wind-down strategy is facing its own speedbumps. Automotive News [sub] also reports that Chrysler’s offer to buy back parts from culled dealers for 68 cents on the dollar is being widely rejected. Chrysler had initially tried to act as a broker, helping culled dealers sell parts inventories to the remaining dealers. However, as Chrysler spokespeople explain “We were asked by congressional leaders to consider doing more if dealers were unable to sell their parts inventories through the matchmaker system.” The result of that legislative intervention was the 68 cents on the dollar offer, which includes conditions requiring that (among other things) parts not meeting Chrysler’s eligibility requirements to be shipped back to the dealer at the dealer’s expense and dropping all parts-related claims against “old” and “new” Chrysler. Dealers have until November 27 to take up the offer.

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81 Saab Dealers Slashed Fri, 13 Nov 2009 14:24:03 +0000 Born from Jets, killed with fire (

Automotive News [sub] has more bad news for Saab dealers and customers. Saab’s prospective new owners have put the hit out on 81 of Saab’s current 218 US dealerships. If all goes according to plan, a measly 137 US Saab dealers will remain. Saab’s thin and uneven sales and service network has been an issue for the brand forever, and this isn’t going to make it any better. “The target date to close the sale of Saab is Nov. 30, but it could take until year end, says Mike Colleran, COO of Saab Cars North America in Detroit.” Don’t count on it.

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