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GM, Chrysler Dealers Reinstated? 600 Dealerships Apply For Reinstatement

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DETROIT — About 21 percent of the General Motors and Chrysler dealers whose businesses are being shut down by the automakers have filed paperwork appealing the decisions.

Around 600 dealers out of the roughly 2,800 whose franchises were revoked last year have asked for arbitration hearings in an effort to get their franchises back. Dealers have until midnight Monday to file for arbitration.

The appeals mean that many neighborhood showrooms that were shut down or scheduled for closure could return to business. GM Chairman and CEO Ed Whitacre Jr. has said he expects hundreds of dealers to win their franchises back during the process, which must be wrapped up by June 14.

GM and Chrysler decided to shed dealerships during severe financial problems that plunged them into bankruptcy protection last summer. While GM has told about 2,000 Chevrolet, GMC, Buick and Cadillac dealers that they will be phased out by October, about 700 will stay open because the automaker has not taken away all of their brands. Chrysler already has revoked 789 Chrysler, Dodge and Jeep franchises. Both companies said the doomed dealerships weren't profitable, were too close to other dealers or were in areas where buyers no longer live or shop.

The dealer appeals are being filed under a federal law passed in December that appointed the American Arbitration Association to handle the claims. Arbitrators will consider a dealership's profitability, the manufacturer's business plan, the dealership's economic viability, and whether the dealer met objectives outlined by the automaker.

Congress passed the law after dealers complained that businesses run by their families for generations were taken away unfairly.

India Johnson, an association senior vice president who is in charge of the hearings, said she expects 700 to 800 dealers to seek binding arbitration.

But not all will get hearings, she said. Some filed paperwork to preserve their right to appeal but may not proceed, while other dealers may settle with the automakers before arbitration hearings, she said.

The arbitration hearings, which must be conducted in the dealership's home state, are likely to cost both sides a lot of money. Some dealers may lack money to pursue arbitration because they've closed their businesses or aren't making as much as they once did.

Mike Wolf, who is appealing Chrysler's decision to cut his family's Chrysler-Jeep dealership in Plymouth, Wis., near Green Bay, says the state dealership association told him to expect legal costs of $25,000 to $75,000.

It's a gamble for dealers whose franchise agreements alone are worth anywhere from $500,000 to more than $2 million, Wolf said.

Dealers and automakers also have to split the cost of the arbitrator, meeting rooms and fees. Both GM and Chrysler have received government aid, part of which could be spent on the appeals.

The nonprofit arbitration association will do all it can to keep costs down, Johnson said. In some cases, dealers may represent themselves without an attorney, and others may request arbitrators that will cut their hourly rates, she said.

Chrysler CEO Sergio Marchionne has said the automaker may challenge the constitutionality of the arbitration law in federal court. Spokeswoman Kathy Graham said Thursday that the company has not decided whether to go to court.

Graham said Chrysler already has had to hire people to handle the paperwork, and it likely will need teams of lawyers and company officials to attend multiple hearings on the same day in different states.

Several dealers also are challenging the closures in court under state franchise laws that make it difficult for automakers to cut franchises.

GM plans to have about 4,100 Buick, Chevrolet, GMC and Cadillac dealers in the future. Chrysler had 2,352 dealerships remaining at the end of December.

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