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Rejected GM, Chrysler dealers win 6-month arbitration process

November 16, 2010

WASHINGTON—Legislation signed Dec. 16 by President Obama gives rejected General Motors Co. and Chrysler Group dealers access to neutral arbitration if they want to be reinstated, kicking off a a 220-day arbitration process.

GM and Chrysler have until Jan. 15 to send letters to the owners of about 2,150 rejected dealerships, informing them of their rights under the new law and spelling out the reasons that their franchise agreements were terminated. The eliminated dealerships have until Jan. 25 to give notice that they intend to seek arbitration.

Arbitration must be completed within six months, and dealerships that win must receive a letter of intent from the automakers within another 14 business days.

Rejected dealers who elect arbitration must pay their own fees, expenses, and costs associated with the arbitration, as well as half of the shared costs of the arbitration—arbitrators’ fees, meeting room charges, administrative costs and such.

The dealer-rights legislation was part of a $446 billion spending bill. Leading Democrats acted after GM and Chrysler broke off settlement talks and announced plans to create neutral arbitration applying the original criteria they used to mark dealerships for termination.

The new law contains criteria more favorable to dealers than those envisioned by GM and Chrysler.

The arbitrator will decide if a dealer should be reinstated by balancing the economic interests of the dealership, the manufacturer, and the public. Considerations include:

• the dealership’s profitability in 2006-2009;
• the manufacturer’s overall business plan;
• the dealership’s current economic viability;
• the dealership’s satisfaction of the performance objectives established by its franchise agreement;
• the demographic and geographic characteristics of the dealership’s market territory;
• the dealership’s performance in relation to the criteria used by its manufacturer to terminate, not renew, not assume or not assign the dealership’s franchise agreement; and
• the length of experience of the dealership.

 

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