Almost five years after US taxpayers bailed out General Motors and Chrysler, a large majority of their slimmed-down dealership networks are posting soaring profits, Bloomberg reports, and contributing to the US auto industry on track this year to deliver 15.4 million vehicles, the most since 16.15 million were delivered in 2007.
A Federal judge will allow some 75 Chrysler dealers to proceed with a lawsuit against the U.S. Treasury Department, according to Automotive News. The dealers insist that the government violated the Fifth Amendment in administrating the Chrysler bankruptcy when it terminated their dealership franchises.
Arbitrators have finished wading through the 105 cases of rejected Chrysler dealerships, determining that Chrysler was right to send the lots packing in 73 instances. According to Automotive News, those who weighed in on the cases typically cited the carmaker's plans to sell all four of its brands through the same dealerships as reason enough for ousting those that couldn't come up with the facilities to do so.
Company representatives for Chrysler have been in contact with at least 50 dealerships regarding reinstatement into the the automaker's dealer network. According to a leader who represents the 400-plus dealerships seeking arbitration, the dealers contacted will receive intent letters to begin the lengthy reinstatement process.
General Motors and Chrysler dealers unsuccessful in government-mediated arbitration to save their franchises from closure are being thrown a potential life saver. This one, however, doesn't say U.S.S. Government on it, but rather, U.S.S. Sears Auto Center. The nationwide retailer want to expands its Auto Center operations that focus on service and sales and dealers with physical plants but nothing to put in them might be a workable option.
So you're Chrysler, and you hop into the Chapter 11 pool to save your own skin. While you can wash away some of your past sins with a bankruptcy-protection filing, the deal with Chapter 11 is that you've got to come up with a way to get out of your financial pickle and return to profitability. Part of the Chrysler plan to keep its head above water was divestiture of 789 dealers, a very unpopular idea with the rejected sales organizations (and no small number of politicians, whose ears were subse
Chrysler's dealers haven't yet entered the portion of the game wherein they can catch a break. As if the dearth of inventory and lack of new vehicles weren't enough, nearly 150 dealers haven't been able to finalize floorplan financing. Since Chrysler Financial has exited that business, GMAC stepped in, but dealers are having a hard time meeting its terms: 85 have been turned down flat, another 60 or so are still working on it.
After the suggestion of Congressional hearings on the matter, Chrysler's Jim Press assured Senator Kay Bailey Hutchison (R-TX) that Chrysler dealers with leftover inventory after June 9 would "receive a fair and equitable value." It appears that Chrysler is making good on that promise.
A story in the New York Times shines a light on some reasons for the Committee of Chrysler Affected Dealers to challenge the car company's bankruptcy efforts. The element common to all of the dealers profiled is that they did extraordinary things Chrysler asked them to do, such as buy too many cars and combine franchises at their own expense, only to find out they had been chosen for termination after bankruptcy.