- The Washington Times - Friday, January 22, 2010

DETROIT | About 21 percent of the General Motors and Chrysler dealers whose businesses are being shut down by the automakers have filed paperwork appealing the decisions.

Around 600 dealers out of the roughly 2,800 whose franchises were revoked last year have asked for arbitration hearings in an effort to get their franchises back.

The appeals mean that many neighborhood dealerships that were shut down or scheduled for closure could return to business. GM Chairman and CEO Ed Whitacre Jr. has said he expects hundreds of dealers to win their franchises back during the process, which must be wrapped up by June 14.

Arbitrators will consider evidence including a dealership’s profitability, the manufacturer’s business plan, the dealership’s economic viability, and whether the dealer met objectives outlined by the automaker in franchise agreements.

GM has told about 2,000 Chevrolet, GMC, Buick and Cadillac dealers that they will be phased out by October of this year, saying they were underperforming. Chrysler already has revoked 789 Chrysler, Dodge and Jeep franchises. Both automakers have said their dealer networks were built when they had a much larger share of the market, and the ranks must be thinned so the remaining dealers can make more money to invest in their businesses.

The appeals are being filed under a federal law passed in December that appointed the American Arbitration Association to handle the claims.

India Johnson, an association senior vice president who is in charge of the hearings, said she expects 700 to 800 dealers to seek binding arbitration by a midnight Monday deadline. In addition, some dealers will file their paperwork with automakers.

But not all will get hearings, she said. Some filed paperwork to preserve their right to appeal but may not proceed, while other dealers may settle with the automakers before arbitration hearings.

Chrysler CEO Sergio Marchionne has said the automaker may challenge the constitutionality of the arbitration law in federal court. Spokeswoman Kathy Graham said Thursday that the company has not decided whether to go to court.

The arbitration hearings, which must be conducted in the dealership’s home state, are likely to cost both sides a lot of money.

Miss Graham said Chrysler already has had to hire people to handle the paperwork, and it likely will need teams of lawyers and company officials to attend multiple hearings on the same day in different states.

Mike Wolf, who is appealing Chrysler’s decision to cut his family’s Chrysler-Jeep dealership in Plymouth, Wis., near Green Bay, said the state dealership association told him to expect legal costs of $25,000 to $75,000.

It’s a gamble for dealers whose franchise agreements alone are worth anywhere from $500,000 to more than $2 million, Mr. Wolf said.

Dealers and automakers also have to split the cost of the arbitrator, meeting rooms and fees. Both GM and Chrysler have received government aid, part of which could be spent on the appeals.

But Miss Johnson said the nonprofit arbitration association will do all it can to keep costs down. In some cases, dealers may represent themselves without an attorney, and others may request arbitrators that will cut their hourly rates.

Some dealers may lack money because they’ve closed their businesses or aren’t making as much as they once did.

“You always want arbitration to be cost effective,” Miss Johnson said. “This is just a very heightened sense of being cost effective.”

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