Auto dealers facing closure will soon know fate

7/13/2010

DETROIT — All of the General Motors and Chrysler dealers threatened with closure as part of the companies' bankruptcy proceedings will soon know their fate.

Federally appointed arbitrators are down to just 35 cases out of nearly 1,600 dealers who appealed the closures, according to India Johnson, senior vice president of the American Arbitration Association, the dispute resolution service that handled the cases.

Hearings are set to wrap up Wednesday, with the final decisions due by the end of next week.

Congress required the hearings after the automakers announced plans to shutter 2,800 dealers last year. The companies said their U.S. sales didn't justify so many dealers — nearly 10,000 between them. By comparison, Toyota has only about 1,200, even though it's the second-largest automaker by U.S. sales.

But dealers protested that many stores had been in their families for generations, and that the market should determine whether dealerships are viable.

Since the hearings began in February, a majority of the cases have been resolved with settlements outside of arbitration, either because the automakers agreed to reinstate the dealers or the dealers dropped out of the process. Some dealers closed, while others started selling other brands.

Of the cases that remained before arbitrators, judgments have been mixed. Chrysler spokesman Mike Palese said 56 cases had been decided in the company's favor, while dealers have prevailed in 21 cases.

GM won't release numbers until the arbitration process has ended. But GM has been less aggressive than Chrysler in closing dealerships. In early March, GM announced it would keep open more than 660 dealers it had threatened with closure, sharply narrowing the list of dealers who were planning to appeal before arbitrators. At the beginning of June, GM was waiting for decisions in 300 cases.

Johnson said the process was one of the most complicated to ever come before the association, since the time frame was so short and the cases were complex. Some hearings lasted multiple days and had as many as six attorneys involved, she said.