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The Honolulu Advertiser
Posted on: Saturday, March 27, 2010

Chrysler to restore 50 dealers


By Tom Krisher
Associated Press

Hawaii news photo - The Honolulu Advertiser

U.S. automaker Chrysler Group LLC says it has offered to reinstate 50 of the 789 dealers it planned to close.

Associated Press file photo

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DETROIT Chrysler Group LLC said yesterday it is offering to reinstate 50 of the 789 dealers that it previously tried to drop while it was making its way through Chapter 11 bankruptcy protection.

The 50 Chrysler dealers, which the company would not identify, are in areas that can offer service to customers without hurting the remaining stores in its network of 2,334 dealers selling Chrysler, Dodge and Jeep vehicles in the U.S., the company said. The dealers being offered reinstatement have not yet been notified of the company's decision, a spokeswoman said.

The 50 dealers were among 418 that sought arbitration to appeal the automaker's decisions to terminate their franchise agreements. Congress passed a law in December requiring an appeals process for General Motors Co. and Chrysler dealers whose franchises were revoked by the companies.

The move is another sign GM and Chrysler are easing up on plans to thin their dealership ranks after Congress passed a law that requires arbitration to settle disputes. Chrysler had earlier offered franchises back to 36 other dealers whose contracts were terminated.

In addition, Chrysler said it is discussing "mutually beneficial alternatives" with the remaining dealers who have filed for arbitration. A spokeswoman said the alternatives could include reinstatement.

Chrysler is reinstating the 50 dealers because it knows that it will lose those cases during arbitration hearings, said Sheldon Sandler, managing director of Bel Air Partners, a Princeton, N.J., firm that helps car dealers find options when they want out of the business.

"Maybe someone just woke up and realized that they were making a huge mistake, particularly with those dealers where they didn't have a competing car dealer," he said.

Sandler predicts more victories for dealers during arbitration hearings, contending that the process was flawed from the beginning.

Both GM and Chrysler said they needed to make the cuts to keep the remaining dealers healthy. That way, they can invest in better showrooms and more advertising and do less discounting. Dealers also were too close to one another, especially in metro areas, and often competed on price, the companies have said.

But many of the affected dealers said they were treated unfairly, and many protested to their U.S. senators and representatives.

Earlier this month, General Motors agreed to reinstate 661 dealers who faced franchise terminations. GM had been trying to drop some 2,000 dealers from its network. It plans to have about 4,100 Buick, Chevrolet, GMC and Cadillac dealers in the future.

About 1,160 GM dealers have appealed the loss of their franchises, including the 661 that were reinstated.

The negotiations could be more complicated for Chrysler than for GM, since GM hasn't closed its dealerships yet. Potentially, dealers who remained with Chrysler and were given the franchise agreements of dealers who were shut down could sue if the arbitrator decides to reverse Chrysler's decision.