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Legislative Effort Moves Forward Despite Promises From GM and Chrysler to Address Dealership Closures

December 08, 2009

Despite General Motors and Chrysler announcing comprehensive plans to resolve concerns by dealers who were cut or are winding down, the National Automobile Dealers Association (NADA) continued this week to pursue legislation to reverse dealer terminations.

Last Thursday, Chrysler announced that it planned to institute binding arbitration for rejected dealerships. General Motors made a similar announcement the same day, and said it would begin to implement its plan in mid-January provided that legislation related to GM’s dealer restructuring does not move forward.

The NADA responded shortly thereafter, and said it would continue to pursue legislation to restore dealer rights as it maintains talks with the two automakers.

Yesterday, the association said discussions with House leadership and the House Judiciary Committee intensified over the weekend with regard to revisions to an amendment, sponsored by Rep. Steve LaTourette (R-Ohio), on the Financial Services appropriations bill. If successful, the revised amendment, which was unveiled today, would give shut-down dealers the right to arbitration, but it would not provide compensation for affected dealers.

“The Chrysler statement today to offer a binding independent review process is positive in its recognition of the need for an appeal process, but, as always, the devil is in the details as to the criteria considered and the standard for review,” read a Dec. 3 statement issued by the NADA. “Again, as was the case with GM, we also will continue to work with Congress on the pending ‘dealer rights’ legislation in the event a non-legislative solution cannot be achieved on this important issue, which affects thousands of people’s jobs and lives in their communities.”

General Motors officials said last week that the company’s plan offers a more certain and timely process than the legislation being considered. Officials added that the plan provides complete transparency, face-to-face reviews and binding arbitration, which, together, they said will result in dealers being reinstated.

“GM especially appreciates the leadership of Senator [Dick] Durbin and House Majority Leader [Steny] Hoyer and the contribution of other Congressional members. Their tireless efforts to facilitate the discussion among all parties to achieve a non-legislative resolution to address dealer concerns were critical to the development of GM’s comprehensive plan,” said Susan Docherty, GM vice president of U.S. sales. “We are prepared to implement this plan so GM and its dealers can channel our focus on building and selling exceptional cars and trucks.”

GMAC Financial Services is also helping dealerships that are currently winding down their franchises by providing inventory financing for non-GM, used-vehicle stores. A company spokesperson told Automotive News that it is helping dealers in good standing with the company to transition to a different brand or to a used-only dealership.

Close to two-third of House members and 46 senators back the bill that would legally bar GM from closing dealers and seek to reopen dealerships under Chrysler, which closed 789 of its dealers as it went through bankruptcy. General Motors has said that about 1,350 GM dealerships must close by Oct. 31, 2010, because their franchise agreements will not be renewed.

The NADA so far supports the bill crafted by House leaders over the weekend, which is being sent to the Senate for consideration. The hope is to have the final spending measure and the attached agreement on President Obama’s desk by the Christmas recess. Aside from providing third-party arbitration, the bill directs arbitrators to consider a dealer’s past performance and current economic viability. The arbitrator will also consider a dealership’s demographics and geographic location.

The revised LaTourette amendment is part of the final negotiations on a year-end spending bill necessary to keep the government operating. Negotiations on the bill are likely to continue over the next few days.

“The revise amendment would give affected dealers transparency and the right to arbitrate,” read a statement from the NADA. “The arbitrator would balance the interests of the dealer, the manufacturer and the general public. The revisions reflect the goals pursued by the NADA for the past several months on dealer rights.”

 

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