Law Aids Former Dealers Selling Off Stock

The California state legislature enacted emergency legislation allowing terminated Chrysler and General Motors dealers an extension to sell inventoried new vehicles.

The California New Motor Vehicle Board sponsored the legislation, pointing out that many new-vehicle dealerships were unable to sell these units legally because the bankruptcies left them without a franchise to do so.

The period allowing vehicles in dealers' inventories to be sold was to expire Nov. 30. After that, selling new vehicles without a franchise agreement remains unlawful.

The bill also makes it illegal for an auto maker to prevent a dealer from acquiring or maintaining another franchise or requiring that a second franchise be relocated in separate exclusive facilities or in a stand-alone showroom.

The legislation also requires automakers to indemnify dealers or former dealers against product liability claims.

Meanwhile, a dealer activist group continues to push for federal legislation to reverse Chrysler's elimination of 789 dealerships and GM's proposed non-renewal in 2010 of 1,350 stores.

The group, Committee to Restore Dealer Rights, was organized by Maryland multi-brand dealer Jack Fitzgerald. It has spent more than $300,000 campaigning for the legislation, which calls for arbitrators to decide whether dealer terminations were fair and reasonable.

National Automobile Dealers Assn. Chairman John McEleney advocates an NADA-sponsored bill mandating automatic reinstatement of any dealers who meet auto maker criteria. Fitzgerald says that doesn't go far enough.