Car Dealership Reopens After Long Legal Fight

Colleen McDonald is a franchised dealer again. It took some doing.

McDonald in November reopened Livonia Chrysler Jeep in Livonia (MI), after a nearly 6-year struggle in arbitration hearings and court battles against Chrysler Group, beginning in 2010.

It ended in a dealer win last June at the highest court in the land.

“We were very excited and relieved when the U.S. Supreme Court upheld the U.S. Court of Appeals 3-0 published opinion in our favor,” McDonald says. 

Her store is among 32 Chrysler dealerships nationwide to win back their franchises. About 2,100 dealerships were closed by General Motors and the then-Chrysler Group as part of bankruptcy restructurings in the economic crisis of 2008-2009.

Of those closed, 789 were Chrysler-Jeep-Dodge dealerships. Chrysler pared nearly 25% of its dealer body.

Post-bankruptcy, Fiat acquired Chrysler and created Fiat Chrysler Automobiles.

The dealer legal actions were brought on by Section 747 of the Consolidated Appropriations Act of 2010, which gave dealers arbitration rights to win back their shuttered stores.

In 2008, GM and Chrysler received $80.7 billion in U.S. Treasury TARP (Troubled Asset Relief Program) loans to restructure their operations. The purpose was to restore profitability. But a chief goal became paring back the dealers.

The automakers’ decision to cut dealers came after an automotive task force was appointed by President Obama’s staff to oversee the GM and Chrysler bankruptcies. The task force under Steve Rattner decided the two automakers had too many dealers to be competitive.

In addition to her Livonia store, McDonald lost two other stores in Michigan: Century Dodge in Taylor and Holiday Chevrolet in Farmington Hills. 

The businesses were begun by her father, Walt Norris in 1979. Her husband, Dave McDonald, has served as the general manager and vice president. 

Since coming back onboard, the McDonalds set 2016 sales goals that include 650 new vehicle sales as a minimum sales requirement from Chrysler.

The McDonalds did not arbitrate the Chevrolet store. They also did not win in arbitration for the Dodge store.  

Looking back, she says they should not have arbitrated Dodge along with the Chrysler-Jeep franchises. “We should have had separate hearings. I am sure if we had, we would have won both arbitrations,” she says.

She adds: “The Supreme Court found no merit in Chrysler Group’s (plea) to re-hear the case.”

It was an expensive victory though. Including reinstatement and legal costs, it ran “well over seven figures,” she says.

After they got the word, the McDonalds began a gradual re-opening.  They received a “term agreement” from Chrysler after satisfying both building and working-capital requirements, she says.

Re-opening the Livonia Chrysler-Jeep dealership meant renovating the former site. The McDonalds did that in record time – about nine weeks. Their efforts included sprucing up the showroom, improving the sales lot and stocking the store with vehicles.

The McDonalds filed against Chrysler group individually, but as the legal process wore on the Appeals Court lumped the arbitrating Michigan and Ohio dealers together. 

The dealership hired 32 employees (including 16 who worked there before) and plans to add about 10 more within the next year.

The lean years brought lessons in survival. McDonald says they were able to survive after the closures because they had “no debt in our business or personal life.” She also ran a Mitsubishi dealership from the Livonia site, which helped to weather the storm, but has since been closed.

Her attorney, Bob Davis, told her later, “You had the heart to win. You believed in what you were doing.”

The business has changed in a variety of ways over the years, she says, citing among other things the need for advanced training and new skill sets. Chrysler provides much of the training, but dealers pay for it, she notes.

She characterizes the working relationship with FCA as positive as they reconnect with some people and connect with new ones at the automaker.

McDonald is hopeful that some Chrysler dealers still in litigation will get back their franchises.

“There are a few dealers still in litigation in other states,” she says. “So it’s possible there will be a few more who will reopen.” Her advice to them: Hang in there.

Dave McDonald, who has been at the front lines along with his wife, says the struggle was worth it. They have big plans.

“In the upcoming year we will focus our efforts on proper training for our employees and implement processes that will blow away the competition when they visit our service or sales department,” he says.

One sale at a time, he believes “we will earn back our reputation” and their customers.