Several legal questions are being faced by four Detroit area car dealership owners who had won federal arbitration hearings over the summer, making it unlikely that they would sell cars for Chrysler Group LLC anytime soon. The franchises of these dealers were revoked during Chrysler’s bankruptcy. These legal questions are casting doubt on whether their businesses would survive.
The issue is centered on the nature of their franchise agreements and if the deals are governed by state or federal law. According to state law, any existing Chrysler dealer within nine miles of a new franchise can file an objection and terminate the franchise before it opens.
Meanwhile, the previously terminated dealers would be considered new. But if federal law pre-empts state law, there could be a reinstatement of the franchises. Colleen McDonald, who owns Livonia Chrysler Jeep, said that her business is in a “holding pattern,” as not one dealer who got a reinstatement had opened yet because what’s being required is “impossible.”
Other dealerships in the same situation include Bruce Campbell Dodge, Village Chrysler Jeep and Fox Hills Chrysler Jeep. These four suburban Detroit businesses are included in the 32 terminated dealers that have won in arbitration hearings by Congress.
On the other hand, Chrysler prevailed in 76 cases. In 2009, Chrysler shut down 789 dealers, 14 of these were located in metro Detroit, cutting its 3,250-dealer network as part of the bankruptcy restructuring. [via autonews - sub. required]