Tammy Darvish took her family to Washington to see government in action but also to see the importance of fighting for the family business when you think you’ve been wronged.
Her two children watched as she testified before a Congressional subcommittee considering legislation to restore the slew of dealerships closed byCo. and Group LLC as part of their government-aided restructuring.
There was a lesson she wanted them to learn.
“You can never take no for an answer when it’s not right, that’s why I brought my children,” says Darvish, a second-generation dealer who operates the Maryland-based Darcars Automotive Group with her two brothers.
She is among a group of button-down dealers who became feisty activists that lobbied Congress after GM andannounced they were closing about 2,000 dealerships as part of restructuring plans the federal government is overseeing.
At one point, lawmakers considered a proposal to rescind all the closures. Instead, President Barack Obama signed legislation that establishes third-party arbitration that will be available to rejected dealers, many of whom claim they were unfairly terminated and inadequately compensated.
GM and Chrysler had proposed their own dealership review processes in lieu of the neutral arbitration Congress had championed.
The National Automobile Dealers Assn. and other established dealer organizations, such as the National Automobile Minority Dealers Assn., had joined the battle on Capitol Hill.
But one of the fiercest fighters in the effort was an ad-hoc group called the Committee to Restore Dealer Rights, created last summer by Darvish and two other megadealers, Jack Fitzgerald of Maryland and Alan Spitzer of Ohio.
By October, the committee had more than 1,000 dealer members and countless supporters.
Darvish’s dealership group lost two Chrysler stores and was told to wind down its Chevrolet store for a 2010 closing. That happened after Darcar just completed a $1.5 million renovation – “done at GM’s request,” she says.
“There’s no such thing as what they told us – that the train has left the station,” she says. “This is about the constitutional rights of private, individual entrepreneurs in America. You can never take no for an answer when it’s not right.”
Ward’s interviewed about a dozen dealers who had stores slated for closure. In many cases, they felt targeted, saying the rationale used to eliminate them was not objective or fair.
Fitzgerald, who has operated Fitzgerald Auto Malls since 1966, faces losing seven dealerships.
He attacks what he calls “abuse of the bankruptcy courts” by auto makers and “flawed analysis” of who stays and goes among the dealer body.
Fitzgerald thinks the auto makers rushed a decision that could haunt the auto industry for a long time. “If McDonalds wanted to sell more Big Macs would it close 3,400 franchises?” he asks.
Spitzer, owner of Spitzer Autoworld in Ohio, Pennsylvania and Florida, uses strong language, saying the auto makers used “a capricious and arbitrary process with flawed criteria. It was clearly, blatantly flawed.”
Spitzer, who has 30 dealerships in Ohio, Florida and Pennsylvania, stood to lose nearly 10 of them – all Chrysler and GM franchises. His family car business goes back to 1904, three generations.
“I can’t think of a more insidious example in American business than this – the closing of dealerships,” he says. “It’s such a dangerous precedent.”
Chrysler had immediately terminated 789 dealers. GM send wind-down notices to about 1,300 that would leave about 4,100 dealerships by the end of 2010.
GM acknowledges it made some mistakes in eliminating dealers. “To date, we have reinstated 70 dealers who received wind-down agreements,” says GM spokesperson Ryndee Carney.
GM had agreed to provide financial assistance in installments to help dealers wind-down operations: $1,000 per unit in inventory and about eight months of rent as reported on dealers' operating statements.
But Chrysler-brand dealers had a harder landing.
Rhode Island dealer Jim Tarbox called the auto maker bankruptcy proceedings a hoax perpetrated on the public.
Tarbox says he lost everything when Chrysler terminated his Chrysler-Jeep business last spring. Tarbox owned two dealerships, one in Rhode Island and one in Massachusetts. The latter opened in 2007, encouraged by Chrysler.
For years, he was Rhode Island’s top performing Chrysler dealer and was in the top 5% of Jeep dealers nationwide. So the terminations made no sense, he says.
“I had two dealerships I paid millions for,” he says. “I still owe more than $2 million for the two businesses taken from me and were then given to the guy up the street.”
Tarbox said Chrysler axed him due to legal run-ins and political motivations, not performance. A Chrysler spokesperson says although past legal problems with dealers was at one point considered as a criterion for elimination, it ultimately was not used in deciding whom to cut.
Tarbox had successfully sued Chrysler under state franchise laws when it threatened to put a competing franchise nearby. He thinks that’s why he got the ax this year.
“I had more than 65 employees,” he says. “Now I sit here with 15. I once produced millions of dollars in local, state and federal tax revenue.”
Peter Grady, Chrysler’s vice president of network development, insists decisions were based on market conditions at play.
“The numbers make the case,” Grady said in a statement, contending that rejected dealers “achieved on average only 73% of their contractual minimum sales responsibility.”
Dealer reductions were needed in the face of a U.S. vehicle market that has declined 40 percent since 2007,” he said.
Darvish bristles at that. “Cutting dealers to solve the problems of the manufacturer is like giving chemotherapy to a terminally ill cancer patient,” she says. “It is no resolution to the core problem,” Darvish said.
Throughout months of lobbying and testifying before Congress, Fitzgerald kept the faith.
“I believe the industry will rise again, but not the way the auto task force is doing it,” he says, referring to a government group overseeing Chrysler and GM .
“We still sell cars and trucks like we used to. We’re not going anywhere. The (government) doesn’t know selling like we dealers do.”
Darvish says the legislation is a big victory for terminated dealers but “there are no guarantees of reinstatement.”
Moreover, Chrysler indicates it might challenge the constitutionality of the new legislation.
Chrysler CEO Sergio Marchionne says restoring a large number of dealerships could create havoc.