Report: Chrysler Group will stop awarding new franchises temporarily

Article by Christian Andrei, on August 29, 2010

Chrysler Group buckles under the surge of complaints and agrees to temporarily halt the awarding of new franchises in the markets of closed dealerships that are in arbitration.

In a statement, Chrysler Group revealed that it now understands that its approval of new franchises is a cause of concern among policymakers and among arbitrating dealers.

On good faith, Chrysler Group said that it will withdraw from network actions that directly affect a dealer in arbitration until a ruling is handed down for the case. The only exception is if Chrysler has become "contractually obligated" to grant a new franchise.

Earlier this month, Rep. Pete Hoekstra, R-Mich., and Steven LaTourette, R-Ohio, asked Chrysler to stop with the new franchises.

They argued that when closed dealerships win reinstatement from an arbitrator, they could be stopped from reopening because a new franchise is already in that market. Complaints have also been raised by some rejected dealers in the past few weeks over Chrysler's new franchise awards.

This is actually Chrysler's second moratorium in recent months. Chrysler initiated a halt while settlement talks were ongoing with dealer groups to talk about an alternative to legislation.

But the talks were unsuccessful. Last fall, Chrysler told dealer groups that it intends to award about 100 new US franchises. Since then, Chrysler has not updated this figure. It appears though that not everyone is convinced of Chrysler's move.

Tamara Darvish, a leader of the Committee to Restore Dealer Rights, which represents rejected Chrysler and General Motors Co. dealerships, calls this move as "window dressing to placate Congress."

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