Rejected Car Dealers Seek Arbitration

According to a recent article in The Wall Street Journal, more than half of the car dealers rejected last year by General Motors Co. and Chrysler Group LLC have filed claims for arbitration to determine whether they can win their franchises back.

Over 1,550 dealers submitted requests for arbitration, according to the American Arbitration Association, which is managing the process.

Of the 2,789 dealers eligible to file claims, 789 were Chrysler, Dodge and Jeep dealers. On the GM side, 1,300 dealers who were notified they would lose their franchises by October are eligible, as are 700 GM dealers who had at least one of the company’s remaining four brands stripped from their line-up.

After months of complaints and lobbying efforts by the rejected dealers, Congress passed a law that created an arbitration system to settle disputes between the car dealerships and the companies that could result in some dealers being reinstated.

Car companies, during their restructuring last year, shed dealerships in a bid to consolidate and rationalize their retail networks and eliminate poorly performing outlets. In bankruptcy, the companies were able to dodge rigid state franchise laws that protect dealers.

In December, Chrysler’s Chief Executive Sergio Marchionne said, reinstating dealerships “could cause havoc within Chrysler.” A person familiar with the company’s thinking said the arbitration could cost the company hundreds of millions of dollars, depending on how many dealers proceed with arbitration.