Chrysler dealers losing franchises object, judge says company has good case for terminations

Chrysler dealers question franchise terminations

NEW YORK — A parade of Chrysler dealers slated to lose their franchises took the stand Thursday in the automaker’s bankruptcy protection case, one choking back tears, as they touted their sales and service records and questioned how they were chosen for termination.

Just under 20 dealers were sworn in at the beginning of the day, but only about 14 testified, and no Chrysler officials took the stand. Arguments on the motion are scheduled for Tuesday.

It was unclear when U.S. Judge Arthur Gonzalez will rule on Chrysler’s motion to cancel the dealerships’ franchise agreements, or how this will effect Chrysler’s plans to sever ties with them effective Tuesday.

James Tarbox broke down while testifying about learning that the franchises for his pair of dealerships in Rhode Island and Massachusetts were included on Chrysler’s list of the 789 it plans to terminate.

“I thought there must be a mistake,” he said choking back tears.

Though acknowledging that he posted a loss for 2008, Tarbox said his dealerships have won awards for both sales and service in recent years.

Auburn Hills, Mich.-based Chrysler claims that it needs to reduce its dealer base by about 25 percent to a leaner network of about 2,400 dealers in order to emerge from Chapter 11 bankruptcy protection as a stronger company.

But the dealers argue that they don’t cost the automaker anything. They say that if Gonzalez approves Chrysler’s motion, hundreds of dealerships will be shuttered, and thousands of workers will lose their jobs.

A group representing about 300 of the dealers have filed an objection. They also earlier opposed Chrysler’s sale to Fiat, saying it was tied to the plan to eliminate the dealerships. Several attorneys for individual dealers also have filed objections.

Alan Spitzer of Medina, Ohio, an auto dealer since 1970, said he spent $3.5 million in 2003 on a new building to combine two of his Ohio Dodge dealerships under one roof.

The plan was to put Chrysler and Jeep dealerships eventually at the same location — a move in line with the automaker’s stated goal of having all three of its brands located together at dealerships.

But all of Spitzer’s Chrysler franchises, including others in Ohio and one in Florida, were included in Chrysler’s list of those it plans to terminate. Spitzer also owns other dealership that sell a variety of other brands of vehicles.

Spitzer said he thinks his dealerships may have been singled out because he didn’t take part in Chrysler’s advertising campaigns or increase his inventory enough when the company was pushing dealers to buy additional vehicles.

He said wouldn’t have invested millions in his dealerships if he thought he wasn’t protected by state franchise laws.

“We worked with Chrysler on all these projects, committed tens of thousands of dollars in bricks-and-mortar acquisitions, but yet they come back to more trivial things and reject us,” Spitzer said. “There’s no way I’d do it, invest all that money, without those state laws.”

Before the day’s testimony began, Gonzalez noted that the automaker has a good case to terminate the dealer franchises.

Gonzalez said that under Chrysler’s plan, those dealers will remain with “Old Chrysler,” a collection of assets that aren’t slated to be sold to a group led by Italy’s Fiat Group SpA.

Since those leftover assets won’t be making vehicles, there would be little use for the dealers that would go with them, Gonzalez said.

“If the sale would be consolidated, there’s a strong argument that no dealer network would be needed,” Gonzalez said. “Nevertheless, I think it’s still important to have this hearing.”

Late Sunday, Gonzalez issued a ruling approving the government-backed sale of most of Chrysler’s assets to a group led by Fiat. But the sale has been stayed pending an appeal filed by three Indiana state pension and construction funds.

Arguments before the U.S. Court of Appeals for the Second Circuit are scheduled for Friday afternoon.


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