Chrysler Group in the US maintains that it has not violated a new dealer-arbitration law despite the allegations of three dealer attorneys representing 65 rejected showrooms.
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The lawyers told Automotive News that by failing to explain the reasons for each dealership’s termination Chrysler had shown bad faith with its rejected dealers.

“We’re going to make an issue of this early on and explain that they’re not in compliance with the law,” said Mike Charapp, a legal consultant to state dealer associations with more than 20 arbitration clients.“There are consequences to that. We’ll have to ask the arbitrators to decide what the consequences are.”

The dealer-arbitration law states that by January 15, Chrysler and General Motors must have provided each closed dealer with “the specific criteria pursuant to which such dealer was terminated, was not renewed or was not assumed or assigned to a covered manufacturer”.

For Chrysler that was 789 dealers and 1350 for GM.

Each Chrysler dealer received a four page letter listing rejection criteria as a whole and an individual scorecard of how the specific dealer rated, but didn’t say which scores were considered deficient or which categories were used to decide that a dealer would be closed.

Dealers were assessed across 22 criteria including customer service, market share and sales volume, and were given percentage scores against 13 factors including customer and sales satisfaction indexes and minimum sales responsibility on the personalised scorecards.

GM’s letters contained a short explanation of why each individual dealer was targeted for shutdown.

Chrysler has since defended its handling of the situation.

“The legislation requires the company provide the criteria used in rejecting the dealership’s dealer agreement. We did that.“Not only did the company comply with the requirements of the legislation, we exceeded them.“The information shared with the affected dealers is the specific criteria used in deciding which dealer agreements were rejected as well as the individual dealer’s data. A narrative was not required.”

But some dealers and lawyers remain unsatisfied with Chrysler’s explanation.

“The Chrysler scorecard doesn’t reflect what the company did at the time of the termination decision. I find that incredible,” said Eric Chase, representing more than 10 arbitration clients.“The common sense interpretation of the statute requires that Chrysler tell the dealer why he was terminated.”

Dealers have one week from today to flag their intent to file for arbitration, with decisions on whether to reinstate dealerships or not due by June.

(with Automotive News)