More than 1,500 GM, Chrysler dealers challenge closings

For Immediate Release:

January 26, 2010

Contact:DAVID SHEPARDSON

Detroit News

Washington -- More than half of General Motors Co. and Chrysler Group LLC's dealers that were ordered closed by the company appealed ahead of a midnight deadline set by Congress.

India Johnson, a senior vice president at the American Arbitration Association said that as of Tuesday afternoon, it had received between 1,550 and 1,560 appeals out of nearly 3,000 dealers. The list includes at least 79 dealers in Michigan.

But Johnson said appeals are still arriving by mail -- and will be accepted if postmarked before the midnight deadline. A final tally won't be in place until Friday, she said.

The AAA is also eliminating duplicate filings and at least one dealer already has withdrawn an appeal.

The dealers filed for arbitration under a law approved by Congress in December that gives closed or closing dealers the right to challenge the decisions. Johnson could not estimate the final figures.

The law also allows dealers to file with the 22 local American Arbitration offices around the country, which could lift the final tally significantly.

GM Chairman and CEO Edward Whitacre Jr. said Monday that 500-600 GM dealers have appealed. He said any decisions to reinstate dealers wouldn't hurt the company.

GM and Chrysler ordered the dealership closings as part of their bankruptcy restructuring. They said their dealer networks were too large and expensive.

Whitacre said this month that GM is likely to reinstate "hundreds of dealers," but then backpedaled and said it could be as few as 100. He has taken a more conciliatory approach to the dealer issue, acknowledging GM likely made some mistakes in its dealer closings.

A senior member of Congress urged Chrysler to say whether it will challenge the law. Chrysler has said only that it is complying with the law, but has not publicly ruled out a legal challenge.

House Majority Leader Steny Hoyer, D-Md., praised GM for agreeing to live with the law.

"With this decision, GM Chairman and CEO Ed Whitacre has demonstrated GM's commitment to having the strongest possible dealer network. It is also a recognition that GM must solidify that network as soon as possible so it can return to profitability and keep Americans on the job. It is my hope that Chrysler will follow GM's lead," Hoyer said.

In December, Congress passed a provision signed into law by President Barack Obama that grants dealers on the automakers' closing lists a chance to appeal and receive a decision within six months.

The provision was strenuously fought by automakers during a six-month battle in Congress that cost them considerable political capital -- largely because dealers have significant clout and often are campaign contributors.

GM said this month that 2,000 dealers it ordered to close are eligible for arbitration, if they choose to fight to remain open. That figure includes 1,300 to close outright by October 2010 and 700 losing at least one GM brand.

The legislation also applies to 789 dealers that Auburn Hills-based Chrysler closed in June, or one-quarter of its network.

Dealerships that sell only one of the four brands that GM is shedding -- Saturn, Saab, Hummer or Pontiac -- are ineligible for the appeal process.

Under the law, decisions generally are to be made by June 14.

Each arbitration case will be separate, and dealers must pay their share of costs of the process that could top $100,000.

GM already has reversed its decisions on about 80 dealers. It set aside $600 million to pay closing dealers and gave them until October of this year, which is more than a year to wind down.

By contrast, Chrysler heard no appeals and offered dealers no cash compensation and gave them just a month to close their doors.

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