Reinstatement May Pit Dealer Against Dealer

Arbitration will do more than put some rejected Chrysler Group and General Motors Co. dealerships back in business. In some cases it stands to pit two dealers against each other with claims on the same territory, Automotive News reported.

That's because after bankruptcy the automakers appointed some new dealers to fill in empty markets.

If existing and reinstated dealers occupy the same territory, Chrysler said it expects "protests to be brought against the reinstated dealers" under state franchise laws that protect dealer rights.

Chrysler declined to say how many new dealerships it has appointed since bankruptcy. In some cases, it issued only letters of intent to provide franchises. The company told dealers last fall that it planned to open about 100 new points.

Of Chrysler's 789 rejected dealerships, 409 filed for arbitration.

The arbitration hearings are expected to start in early March. Under the law signed by President Obama in January, arbitration for rejected Chrysler and General Motors dealerships must be completed by mid-June, though arbitrators have the discretion to extend the process for a month.

The American Arbitration Association, which oversees the process, now is assigning arbitrators for the 1,573 cases.

In some cases, rejected and pro-spective new dealers are already talking to each other to reach a solution.

GM chose to wind down about 1,350 dealerships through October 2010. It has appointed new dealerships "on a very limited basis," GM spokeswoman Ryndee Carney said. In "select cases," particularly if a dealer is only losing one franchise from a multibrand store, GM has appointed a new dealer in a market in which a wind-down dealer is still open, Carney said. She declined to give specific numbers.

Arbitrators can decide only whether to reinstate dealerships, but the automakers can move to settle cases with cash outside of arbitration.

Chrysler acknowledged that arbitration will pose a financial burden but expressed confidence in its ability to defend against the claims. The company declined to say whether it intended to settle or drop any cases.