Hoyer, Durbin Announce Plan to Resolve Disputes with Terminated Auto Dealers

For Immediate Release:

December 8, 2009

Contact:Katie Grant
Stephanie Lundberg
(202) 225 - 3130

WASHINGTON, DC – House Majority Leader Steny Hoyer (D-MD) and Assistant Senate Majority Leader Dick Durbin (D-IL) today announced new legislative language to address the ongoing dispute between GM, Chrysler and dealerships that were closed during the companies’ restructuring.

The Hoyer-Durbin language expands the binding arbitration offer GM and Chrysler presented to dealers last week by requiring the arbitrator to balance the economic interests of the terminated dealership, the company and the general public when considering dealer reinstatement. It further preserves the right of dealers and companies to enter into agreements outside binding arbitration.
“It is imperative for both auto dealers and auto companies to have a transparent process that gives dealers a chance to make their case for remaining open, while respecting the companies’ need to return to profitability.  Profitable dealerships that were closed for possibly unfair reasons deserve the opportunity to hear why they were closed and discuss the merits of reopening with an independent arbitrator who can make a binding decision.  This is a fair process that protects the rights of both sides and protects our national interest of having both successful auto dealers and successful auto companies,” Hoyer said.

“Closed dealerships across the country deserve a transparent review of their termination and the right to get back in business if they were terminated on faulty grounds. GM and Chrysler have the right to determine the size and scope of their business. But Congress has a responsibility to protect taxpayer’s money when addressing the future of companies like GM and Chrysler,” Durbin said. “The compromise we announced today is balanced and responsible. It allows closed dealerships to enter binding arbitration to review their termination, but requires the arbitrator to take the economic interests of the dealership, the company and the general public into account when considering dealer reinstatement.”

Under the new compromise language, an arbitrator will be required to balance the following:

• Dealership Profitability – Requires an arbitrator to consider a dealer’s profitability over the last four years. This provision addresses concerns that the companies terminated dealerships that were otherwise profitable.

• Manufacturer’s Overall Business Plan – Requires an arbitrator to consider how a dealership supports the company’s post-bankruptcy viability plans.
• Dealership’s Current Viability – Requires consideration of a dealership’s economic viability - addressing concerns that some dealerships were adequately capitalized at the time of their termination.
• Dealership Performance In Relation to Manufacturer’s Performance Criteria – Requires arbitrator to consider how a dealership performed in relation to the manufacturer’s customary and regular business objectives, including vehicle sales, capitalization, profitability and customer service.
• Local Conditions – Requires an arbitrator to consider local conditions that have contributed to poor dealership performance like natural disasters and other local economic realities, on which, companies have based previous reinstatements.  It also requires an arbitrator to consider the impact that reinstating a particular dealership would have on other dealerships in close proximity.
The compromise language provides terminated dealers with a swift remedy.  If an arbitrator finds in favor of a dealership, the manufacturer would be required to send the dealer a letter of reinstatement for the same geographic area within 7 business days of receiving the arbitrator’s determination.
National Automobile Dealers Association, the National Association of Minority Automobile Dealers, the Automobile Trade Association Executives, and the Committee to Restore Dealer Rights have endorsed the new language. House Majority Leader Hoyer and Assistant Senate Majority Leader Durbin have led negotiations between GM, Chrysler and auto dealer groups since September.
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