Majority of scrapped GM, Chrysler dealers file appeals
Toyota isn’t the only auto manufacturer taking heat right now. More than half of the auto dealers Chrysler and General Motors terminated in May have filed notice that they will appeal and try to regain their franchise.
The American Arbitration Association (AAA) is still tallying up the final numbers, but as of Tuesday 1,548 dealers had filed for arbitration. Roughly 1,100 of an estimated 2,000 eligible dealers from General Motors filed to appeal, representing 55% of the scrapped franchises.
The Detroit giant wasn’t shocked at the response. “We did not forecast a specific number, but we knew it would be substantial,” said Ryndee Carney, spokeswoman for General Motors.
The General Motors roster of eligible dealers included 1,300 dealerships put on notice in May that they would be closed in October 2010. Another 700 dealers were slated for “partial wind-down,” meaning that one of the dealer’s multiple GM brand franchises is scheduled to be shuttered.
Chrysler also had a strong appeal turnout: As of Tuesday, 418 of the manufacturer’s 789 terminated dealers filed for arbitration, representing 53% of the franchises.
Chrysler dealers face a harder path back to business as usual. While many GM dealers will continue running until October, Chrysler gave its dealers just 30 days to cease operations. All 789 dealers lost their franchises eight months ago. If they’re reinstated, they’ll need to start back up from a standstill.
Chrysler had no comment on whether the arbitration count was more or less than it expected.
“Chrysler is readying itself to actively participate in the arbitration procedure and looks forward to the expeditious completion of the process,” said a company representative, who declined to speak for attribution.
The process will happen fast: Congress mandated that the arbitrations be completed by mid-June.
Dealer reaction to the appeal process has been mixed. Some are fired up and determined to fight to regain their franchise. Others, however, are already so put off by their treatment that they have little interest in returning to the GM or Chrysler fold.
Some states will be fielding far more appeals than others. Ohio and Illinois each have more than 100 dealers planning to appeal, while other states like Hawaii, Arkansas and Rhode Island have few or no appeals. (Click here for a state-by-state breakdown.)
Chrysler said the percentage of dealers cut in each state was “pretty equal.” States with many terminated dealers had many more to start with, according to the company.
“A large part of our reorganization in bankruptcy court was getting the right number of dealers for each market in the right location,” Chrysler’s representative said.
GM also said the representation is fairly proportional. The states with many filings “are large states with large dealer networks, so it stands to reason there would be a large number of arbitration cases filed,” Carney said.
It’s still unclear how many of the dealerships that elected arbitration will go through with it. The further an appeal goes, the more expensive it gets.
Each dealer has to pay $1,625 to enter arbitration, with a matching amount due from the manufacturer. If the case then moves to a hearing — meaning the parties decide not to settle — the dealer has to pay another $625, half of the $1,250 fee the AAA charges to coordinate a case. Legal fees will add thousands more to each dealer’s costs.
It’s isn’t going to be cheap for the Detroit giants, either. Chrysler estimates its price tag could climb as high as several hundred million.
GM’s spokeswoman declined to ballpark the company’s appeal expenses.
“Cost is not the key factor here,” Carney said. “What is important is that GM has the best possible dealer network selling cars and trucks.”