Dealers Plead Their Cases

A team of regional arbitration panels begins hearing from terminated, and in many cases angry, General Motors Co. and Chrysler Group LLC dealers who lost their franchises as part of the auto makers' restructuring plans.

About 1,573 dealers filed for arbitration by the Jan. 25 deadline, according to the American Arbitration Assn., which is handling the appeals process.

The U.S. Congress passed legislation in December giving the terminated dealers a right to appeal through third-party arbitration. All cases must be heard by mid-June.

Ohio, Illinois, Michigan, Florida and Pennsylvania are most heavily represented by dealers seeking arbitration, says India Johnson, AAA's senior vice president.

Industry observers expect a number of dealers will win back their businesses. Some dealers say they are not interested in getting their franchises back but want what they consider just compensation.

Yale King stands to regain his Chrysler Jeep and GM franchises in Colorado.

He was one of the first dealers in the U.S. to file for arbitration. Like many dealers, he questions the criteria used in cutting dealers.

On Feb. 8, nearly two months after dealer arbitration rights became law, he learned his Jeep franchise was being transferred to “a dealer down the road,” Prestige Chrysler Dodge in Longmont.

“If we allow auto makers to use their criteria, it will be a self-fulfilling prophecy,” King tells Ward's. “We as dealers signed up on an individual basis, but we are being taken out in many cases on a cookie-cutter basis.”

He adds: “What Chrysler and GM shouldn't be allowed to do is take somebody's viable business in America and award it to somebody else.”

He says he acquired his GM store in Longmont at the urging of General Motors Acceptance Corp. five years ago.

By coincidence, both his GM and Chrysler franchises were cancelled on May 14, 2009, his unlucky day.

GM also seems to be opening new dealerships in areas where dealers are appealing their cases. That practice could make it more difficult for closing dealers to win an appeal in arbitration, dealers say.

In Michigan, Rep. Pete Hoekstra, R-Holland, notified GM Chairman and CEO Edward Whitacre Jr. that he had problems with GM's decision to open new dealerships in market areas where terminated dealers have active appeals.

“It's clear that this action circumvents the intent of the law and that GM may not be entering the arbitration process with an open mind,” Hoekstra says.

Mark Reuss, GM's president of North American operations, said at the Chicago auto show that GM is open to treating the closed dealers fairly.

GM spokesperson Ryndee Carney says, “We're currently working through the arbitration process with dealers and the AAA.”

Dave Kring, a Cadillac and Chevrolet dealer in Petoskey, MI, is appealing the closure of his Cadillac store, which will mean customers have to drive long distances for sales and service at the next closest Cadillac store.

He's confident he can win in arbitration that he's posted a notice to customers on his dealer website.

It says: “As many of you are aware, GM has informed us of their intent to cancel our Cadillac franchise at the end of 2010. We have appealed their decision and are confident it will be reversed.”

Kring thanks his loyal customers who called and wrote letters to GM and Congress, which should “help us to prevail” in the appeals process.

Nancy Ariano, owner of New Country Auto Center in Durango, CO, could lose her Chrysler store unless arbitration reverses it. In a twist, she says she learned of her dismissal from CNN news

Ariano is the recent chairperson of the Colorado Automobile Dealers Assn. She is owner of New Country Auto, Durango and Cortez, the largest multi-franchise dealership in the region.

Her dealerships also sell Ford, Toyota, Saab and Kia brands. Her Chrysler store in Cortez is not affected by the cutbacks.

Bruce Hamlin is one wind-down dealer who isn't fighting closure of his Tustin, CA, Chevy store. He would like to find an owner for the point, so he doesn't lose his investment.

The Chevrolet-exclusive dealer operates another store in nearby Santa Ana, Guaranty Chevrolet. He will keep Tustin going through October, hoping to find a buyer.

He took the open point in Tustin because Chevrolet asked him to, and against his better judgment, he says. He soon found out he was only competing against himself. “Tustin is only six miles (9.6 km) from our Chevy store in Santa Ana.”