DETROIT — General Motors announced last Friday that it intends to reinstate more than half of the dealers appealing the loss of their franchise agreements, a day after two U.S. Congressmen sent a strongly worded letter asking GM and Chrysler to stop awarding new franchises in areas where dealers are awaiting arbitration hearings.
GM executives said they expected to reach out to 661 disenfranchised dealers by yesterday to offer them their franchises back. Company officials made it clear that the automaker intends to complete the arbitration process before the congressionally mandated July 15 deadline.
“We are eager to restore relationships with our dealers and get back to doing what we do best — selling cars and taking care of customers,” Mark Reuss, president of GM North America, said in a prepared statement. “The arbitration process creates uncertainty in the market. We believe issuing these letters of intent is good for our customers, our dealers and GM.”
The move comes after U.S. Congressmen Pete Hoekstra (R-Mich.) and Steven LaTourette (R-Ohio) accused GM and Chrysler of attempting to avoid the hearings in a letter addressed to General Motors Corp. Chairman Ed Whitacre and Chrysler LLC CEO Sergio Marchionne. The hearings are expected to take place over the next three months.

“It has come to our attention that closed dealerships, who have filed for arbitration and are awaiting a hearing, have had new franchises awarded … in their market area to other dealers,” the letter stated, in part. “It is clear this action attempts to avoid the intent of the law and that [the manufacturers] may not be entering the arbitration process with an open mind.”
The process in question was established by the Consolidated Appropriation Act for Fiscal Year 2010. Signed into law by President Obama in December, the act was designed to offer disenfranchised dealers the opportunity to win back their agreements. With more than 1,000 dealers filing for arbitration by last month’s deadline, Hoekstra and LaTourette want the manufacturers to see that process through before naming any new franchises.
“A closed dealership could be reinstated by an independent arbiter based upon the criteria of the law,” they wrote. “However, in many cases, the closed dealer would be prevented from reopening because of the establishment of a new franchise in the market area.”

General Motors informed 2,000 dealers last May that they would lose their franchise licenses in October 2010. The company, which currently has 5,500 dealers, held a conference call with dealers last Friday to notify them of the reinstatement plan.

In a release issued last Friday, the company said the decision came after the careful review of each of the 1,100 dealer reinstatement claims that were filed with the American Arbitration Association. “We conducted these individual reviews, keeping in mind our goal of moving quickly and effectively to complete the overall arbitration process, and determined that we would send more than 600 letters of intent to the involved dealers,” the statement read. “This action will allow these dealers to conduct normal dealership operations as soon as they comply with the terms of the letter of intent.”