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Article posted on 09/02/10
Posted by: Jerry Burnside

GM, Chrysler Dealerships Continue to Fight to Keep Doors Open

When GM and Chrysler filed for bankruptcy last year their plan entailed closing down thousands of dealerships across the US. Dealers became hopeful about the future of their businesses during the summer when President Obama signed a law allowing them to plead their cases through arbitration. Yet, preliminary data from GM shows that only about 800 of the 2,800 dealerships marked for closure are on the way to making a comeback. The majority of these have been invited back into the fold by GM provided they meet certain requirements including adequate cash reserves, access to financing, approval of location, and standards concerning repair shops.

There are a total of 725 GM dealers who've been extended a chance to keep their doors open, though the invitation does not necessarily guarantee reinstatement. Most are currently striving to meet the conditions set forth by GM, who says the majority of the dealerships brought back into the GM family will successfully meet those requirements. The company says that it will know how many dealers it will keep by November 1st, and the reduction in dealers will mean higher profits from increased traffic for each dealer.

As for Chrysler dealerships, the end came quick. When the company informed 789 dealers of their intent to close them, the dealers had just 30 days to stop selling Chrysler automobiles. Some managed to continue operating by either selling used cars or switching their affiliation to other manufacturers. Of the 789 terminated dealerships, 418 want back in.

Now, a little over a year since they stopped selling Chryslers, just over 60 percent have a chance of rejoining the Chrysler family. Chrysler will allow the dealers back in as new franchises, provided they meet certain conditions, though many dealers, even a few that won their arbitration cases, have had tremendous difficulty meeting those conditions. And then there are a handful of dealers who gave up because they were unable to afford the legal costs associated with the arbitration process.

Last week, three dealers who won arbitration cases filed a joint lawsuit against Chrysler alleging “unduly onerous” conditions imposed by the company. "Chrysler's letter of intent is not a customary and usual letter of intent but is drafted solely to defeat the reinstatement of plaintiffs to the Chrysler dealer network," reads the language of the lawsuit. Chrysler has responded by saying that they have complied fully with the federal dealer arbitration law, and continues to contend that trimming the number of dealers in the Chrysler family will be better overall for all the dealers that remain.

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