Team of Arbitration Panels Set to Hear Dealer Appeals

A team of regional arbitration panels is about to begin 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.

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, six months after the bill’s enactment.

No extension was granted for the filings, says the arbitration association, which is handling the appeals process,

Ohio, Illinois, Michigan, Florida and Pennsylvania are most heavily represented by dealers seeking arbitration, says India Johnson, the organization’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 for their losses.

Although GM provided a wind-down period and a degree of compensation to affected dealers, Chrysler did not.

Colorado dealer Yale King stands to regain his Chrysler Jeep and GM franchises in Longmont and Loveland if he wins in arbitration hearings.

Yale King wants to keep Colorado GM store open.

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.

In mid-February, he took his case to the U.S. federal court in Denver seeking a temporary injunction against Chrysler transferring the franchise during an active arbitration situation. He was turned down.

“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 across the street for virtually nothing.”

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.

“GM is now awarding new franchises in market areas where a wind-down dealer has filed for arbitration,” Hoekstra says. “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.”

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. We estimate we will need about 30 days to prepare.”

GM is working with dealers through the arbitration process as efficiently and effectively as possible “in compliance with the federal law, she says. GM staff and lawyers will “review the cases of each of the GM dealers that have filed to arbitrate.”

King isn’t blaming any one particular entity for the dealer debacle, but is disappointed at how GM and Chrysler have handled the situation. Natural attrition among the dealer body would have taken its course in reducing ranks, he says.

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 dealership 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.”

After receiving the Chevrolet wind-down letter, he thought he could sell the dealership facility to minimize his losses. So far he has no buyers. He feels committed to his employees and will transfer as many as possible to Guaranty Chevrolet, he says.