Saturday, January 23, 2010

Chrysler and GM Dealership Arbitration

I haven't written about the US auto industry for quite a while. For the past several months, the primary business focus has been back on banking - with growing criticism from left and right that Obama has not done enough to shake-up and/or re-regulate the industry.

Looking back, my earlier posts on the car crisis were as follows:

April 17, 2009 (here): "It seems as though Chrysler might become the sacrificial lamb of the US auto industry, although maybe public pressure will compel the four banks to agree to an "unfair" (!) deal." -- Well, I was wrong that Chrysler would go it alone down the path of bankruptcy; I guess I thought then that the government would compel a GM solution.

May 17, 2009 (here): "Yesterday's Times included a sad anecdote about a Kentucky dealership that had recently been awarded a "50 year" certificate (from Chrysler, I think) -- then, just a couple of months later, it's being cut loose. I get the impression from the coverage that some dealers might take legal action to try to block revocation of the franchises, but it sounds like they'd be fighting an uphill battle particularly in light of Chrysler's having filed for bankruptcy protection." -- This brings me to today's update. An article in this morning's Times (here) says that the arbitration hearings for Chrysler and GM dealers who are protesting their revocations will occur in the next couple of months.

Nick Bunkley writes that GM's CEO (Edward Whitacre) has signaled they might re-grant the dealerships to "hundreds" of dealers. But Sergio Marchionne of Chrysler (he's the Fiat guy) is taking a different tack:
Marchionne, who was not involved in the company when the cuts were made, nonetheless defended them this month during a speech to an industry conference. “The decision that we made, I think it was made with diligence, it was made equitably, and I think it was done fairly,” Mr. Marchionne said. “What I cannot do is unwind the last seven months of history, during which Chrysler went on and started rebuilding a distribution network on the assumption that the ruling of the bankruptcy judge was final.” He added, “My conscience is clear.”
GM cut 1,300 dealers and Chrysler cut 789. Whereas GM gave most of their eliminated dealers until this coming fall to shut down operations, many of the Chrysler dealerships only had 4 weeks to do so.

As of Friday afternoon, 915 dealers had filed to contest their termination, according to an executive with the American Arbitration Association, which is overseeing the review process.

In other business news, the stock market dropped about 5% the past three days, after having continued its steady (unmerited??) increase for a number of months.

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