LOS ANGELES – A glitzy start never guarantees a gilded future here.

Take Motor Village LA, a new Chrysler, Jeep, Dodge, Ram Truck, Fiat and accessory outlet in downtown Los Angeles.

In November, the company-owned dealership staged a red-carpet grand opening attended by 350 heavy hitters from the automotive, media and entertainment industries, including Chrysler CEO Sergio Marchionne.

“The Los Angeles Motor Village goes above and beyond the traditional Chrysler Group dealership,” says Peter Grady, Chrysler’s vice president-network development and fleet. “This dealership creates a presence both inside and out.”

The dealership has garnered attention for its interior of individualized display areas, or salons, for each of the auto maker’s vehicle brands, similar to the way models are presented at auto shows.

The store also boasts a Mopar Speedshop, interactive information kiosks with state-of-the-art touchscreen technology and a cafe. The building’s eye-catching glass tower displaying vehicles and overlooking well-traveled Interstate 110.

At the grand opening, Chrysler heralded the flagship store as a “grand showplace” trying out “new, innovative and experimental displays, materials, furnishings, processes and customer services.”

Fast forward to today, as the dealership must now explain to state officials why it should be allowed to operate.

The California New Car Dealers Assn., which represents more than 1,200 dealer members, has filed a protest with the state’s New Motor Vehicle Board.

The association claims Motor Village violates state laws prohibiting manufacturer-operated shops within 10 miles (16 km) of related dealerships.

Association President Peter Welch tells Ward’s there are three other Chrysler dealerships in the 10-mile radius around Motor Village: CarMax LAX Chrysler Jeep Dodge in Inglewood, Glendale Dodge Chrysler Jeep and Alhambra Chrysler Jeep Dodge.

Common in places such as Europe, auto maker-run dealerships in the U.S. usually are allowed under limited circumstances and periods.

Those include as a transitional measure, when a dealership is in financial distress and a new dealer is being sought, or a dealership is used to train a prospective dealer who would then ultimately buy the operation as a franchisee.

Welch says there’s ample documentation to prove Chrysler isn’t running Motor Village as a temporary training site or as an insolvency stopgap.

The past three years “have been extremely challenging for California Chrysler dealers,” says the dealer association’s petition. “More than 30 of them were forced to close their doors due to the collapse of Chrysler Financial and the recession.”

The surviving Chrysler, Dodge and Jeep dealers, the document adds, “are fierce competitors, but they cannot fairly compete against a Chrysler-owned dealership in their own backyard, especially a $30 million-plus behemoth.”

Unlike a majority of the cases considered by the board, the Motor Village issue is not a direct protest that pits one interest against another.

Instead of conflict resolution, the CNCDA petition asks the NMVB, scheduled to consider the matter this month, to direct the state’s Department of Motor Vehicles to “exercise its authority and power to initiate disciplinary proceedings against the motor vehicle manufacturer license” held by Chrysler.

“We believe they need to obey the law,” Welch says. Chrysler spokesman Ralph Kisiel declines to discuss the matter in detail, but says the auto maker disagrees with the CNCDA’s assertions and “looks forward to discussing” Motor Village’s legality with the Department of Motor Vehicles.

William Brennan, the NMVB’s executive director, says revoking Chrysler’s license would be “the worst case-scenario.”

If it is determined the auto maker hasn’t complied with market restrictions, the issue could be resolved by Chrysler closing all but the Fiat line (because there is no competing same-brand dealer nearby), selling the entire dealership or qualifying for a market exemption by using the facility to foster a dealer candidate.

“This is a rare bird,” Brennan says.

Joe Piane, general manager for Glendale Dodge Chrysler Jeep, says he welcomes competition “as long as everyone plays on an even playing field.”

As long as Motor Village LA “is not being subsidized in any way shape or form, everything’s all well and good,” he says.

Motor Village LA is in a heavily renovated building that once housed a Pierce-Arrow dealership in the 1920s. The store marks Chrysler’s return to central Los Angeles.