Chrysler’s Valued-Dealer List to Be Preliminary Filing

Media reports say Chrysler LLC is planning to terminate as many as 800 dealer franchise agreements Thursday, even as company officials insist the auto maker is not ready to announce plans to reduce its dealer body.

Court documents filed late last week appear to contradict both accounts.

Judge Arthur Gonzalez, who is overseeing Chrysler’s bankruptcy, has ruled the auto maker must file a preliminary list with the court on Thursday, naming valuable dealers it plans to move to a new company to be created with Fiat Auto Group, once Chrysler emerges from bankruptcy.

Chrysler must submit a list to the bankruptcy court and inform its dealers of their status at least 13 days prior to its assets-sale hearing scheduled for May 27.

However, Chrysler Vice Chairman and President Jim Press told dealers in a conference call Friday the auto maker does not know who, how or when a dealer reduction will occur. Nor do Chrysler executives know how many dealers will move forward with the new company.

“We do not have a finalized plan yet,” he said. “As soon as we are in a position to announce these activities, we will do that.”

This could indicate Chrysler will file a motion today asking the court to push back the date of the sale hearing, giving it more time to assemble its dealer list.

Chrysler dealers await their fate.

Ward’s first reported last week the list will not be a final cut, which means dealers likely will move on and off the list. According to court documents, a final list is due to the court 30 days after the preliminary document is submitted.

Attorney Michael Charapp, of Charapp & Weiss LLP, a Virginia-based firm specializing in commercial law, believes, “there will be a lot of horse trading going on” between Chrysler and its dealers in that 30-day period.

Dealers will try to argue their way onto the list, while Chrysler likely will use it to force specific dealers to comply with certain demands, as it tries to complete its Genesis initiative in which all of its dealerships house the Chrysler Dodge and Jeep brands, Charapp speculates.

Dealers on the initial list will receive certified letters Thursday informing them of their status and how much Chrysler plans to pay them of money owed. According to court documents, dealers will have 10 days to file potential objections on the amount Chrysler says it will pay.

Another key point arising from the court documents is dealers making the first cut that have one of the older Chrysler Direct Dealer Agreements must modify the contract to match the current and newer Sales and Service Agreements. Dealers who do not comply can’t keep their franchise.

It’s unclear from court documents whether Chrysler plans to inform dealers who are not on the preliminary valuable franchise list, but Charapp speculates all dealers will learn their status.

Chrysler informed its national dealer council last week in a meeting in Auburn Hills, MI, the company is evaluating the viability of its 3,200 dealerships based on geographic location, financial health, customer satisfaction, condition of facilities and whether they are meeting their minimum sales responsibility.

Earlier this week, a group of Chrysler dealers retained law firm Squire, Sanders & Dempsey to represent “affected” Chrysler dealers not on the survival list. Dealers are being asked to pay $4,000 to participate in the effort.

It’s unclear whether dealers will have any leverage in bankruptcy court. A bankruptcy attorney told a group of Michigan dealers last week that if they are not on the initial list, their only hope for making the final cut is to convince Chrysler they belong.

Ward’s reported last week that Arnold & Porter LLP, the law firm National Automobile Dealers Assn. has retained to represent Chrysler dealers in the bankruptcy case, informed the trade association it will not be able to continue defending dealers slated for termination, because their interests will conflict with surviving dealers.

NADA is flying in 150 state association directors and dealers into Washington this week to generate support for its dealers. The group is meeting with congressional members today and with the automotive task force tomorrow to argue the forced rapid reduction of dealers will do irreparable harm to the economy.

Meanwhile, General Motors Corp. says it will begin to mail letters this week to as many as 1,200 dealers, notifying them of its intention not to renew their franchise agreements next year.

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