Dealer Cull Fallout Swirls

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.