By on January 18, 2010

Even with a government-mandated arbitration process in place, the battle between Chrysler and its 789 culled dealers is a low-down, dirty dogfight. Last week, Chrysler sent out letters to all of its rejected dealers, in its attempt to comply with the arbitration law’s disclosure requirements. But, dealers tell Automotive News [sub], those letters are justifications, but not explanations. Absent concrete evidence for why their franchises were closed (something GM has provided to its culled dealers), lawyers for some 65 rejected dealers are fighting back.

AN [sub] reportedly got its hands on several of the rejection letters, and describes them thusly:

Each Chrysler mailing consists of a four-page form letter that lists criteria used to reject dealerships as a whole, as well as a personal scorecard of how the individual dealership performed in a variety of categories… The form letter lists 22 criteria, including sales volume, market share, customer service and working capital. The scorecard has 13 factors, including minimum sales responsibility, customer satisfaction index and sales satisfaction index.

Crucially, however, “the Chrysler scorecard doesn’t say which score was considered deficient by Chrysler, nor does it say which categories were used to decide that a dealership should be closed.” This issue has dogged Chrysler’s dealer cull since day one, with rejected dealers arguing that testimony from Chrysler’s bankruptcy like the clip above prove that the dealer cull was arbitrary and not performance-based.

Now that the arbitration process is in place, backed by the force of congressional mandate, culled dealers finally have some recourse… as long as federal arbitrators go where the bankruptcy court wouldn’t and make a definitive ruling on Chrysler’s cull process. The new law requires OEMs to provide culled dealers with, “the specific criteria pursuant to which such dealer was terminated, was not renewed or was not assumed and assigned to a covered manufacturer.”

Dealer lawyers tell AN[sub] “we’re going to make an issue of this early on and explain that they’re not in compliance with the law. There are consequences to that. We’ll have to ask the arbitrators to decide what the consequences are.”

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6 Comments on “Chrysler In Breach Of Arbitration Law Already, Allege Dealers...”

  • avatar

    Want a prediction on this… The dealers will lose,  just like the bond holders.

    Sales are soo bad, and have been soo bad for soo long at Chrysler  now, the dealer hold NO cards in this game.

  • avatar

    An intelligent businessman wouldn’t fight tooth and nail and pay lawyer fees to try to hang on to a 3rd rate franchise selling yesterday’s goods.

    An intelligent businessman would concentrate on getting a KIA franchise.

  • avatar

    These dealers must think that, somehow, there’s a pot of gold at the end of the litigation rainbow.  If there were any justice, should they “win” their suit, they should be “paid” not dollars, but in rebates on a new Chrysler product…

    • 0 avatar

                      In a world where such old-fashioned things as sales, contracts, profits and losses play a distant, almost nonexistent fiddle to connections in high places, campaign bribes and nonsense passing for “economic policy”, normal rules no longer apply. Everything is random, and as long as you manage to align your interest with that of enough well placed lawyers, who knows how many regular Joe working stiffs you can have the authorities bully into paying for your incompetence.

  • avatar

    Dear (former) 65 Chrysler Dealers,

    You have asked for details on why your franchise was culled and we provided you with 22 criteria, including sales volume, market share, customer serivce and working capital. We also provided you with a scorecard for your dealership that has 13 factors, including minimum sales responsibility, customer satisfaction index and sales satisfaction index. You ALREADY know that we favored dealers who carried all three of our brands and who did not compete with other dealers of our brands in the same market area. An yet you say that our letter of explanation does not say which score was considered deficient by us as if we are keeping some big secret. When you were a young lad in school and you got a 65 on a test or an assingment the teacher didn’t have to explain what the score meant, you know it sucked. And you know if you kept getting 65’s your grade for the course was going to be D, F, or U and there would some ‘splainin’ to do when your parents saw it. Do we have to spell it our for you, dear (former) dealer? Your rejection was based on one or more of the following: You didn’t have all three brands at your dealership; Your CSI was below par and your lousy performance was reflecting on the manufacturer; Your volume wasn’t high enough compared to other dealers in your area/in other areas similar to yours in population density, demographics, etc.; You were in the same market as another dealer who was much better in sales volume, or customer service, or better capitalization, or had a standalone store without products from rival automakers, or all of the above.

    Now please, take your lumps like a (business) man or woman and stop bellyaching to the media and congress about how “unfair” this is. Life is unfair. Besides, if your dealership is really that good you should be able to attract another franchise like Toyota or Honda or Hyundai in no time. No? Well, I guess there’s always the Chinese or ZAP. But we sincerely wish you the best in all your future endeavors. All 65 of you.


  • avatar

    more heads in sand

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