Some GM and Chrysler dealers destined for the dustbin get new life

Some 2,000 General Motors and Chrysler Group auto dealerships may get a second chance to stay in business as the car companies reassess the future of franchises that were slated for closure or already shut down. The review process is part of binding arbitration GM and Chrysler have entered into to sidestep passage of federal legislation that would compel them to provide compensation to franchisees or reinstate dealership contracts.

The two carmakers said they would review the closure lists and determine whether the decisions were business based. They also promised more transparency. GM, for example, agreed to tell Cadillac, Buick, GMC and Chevrolet dealers how decisions were made, and provide face-to-face reviews with dealers that are still open, among other concessions.

Carmakers Under Pressure from Dealers and Congress

"GM values its dealer body and recognizes the contributions they are making to the future viability of the company, the critical role they play in satisfying customers and their importance to communities across the country," said Susan Docherty, vice president for U.S. sales, in a statement. "We are prepared to implement this plan so GM and its dealers can channel our full focus on building and selling exceptional cars and trucks with the consumer experience to match."

Chrysler, run by Italian automaker Fiat, said it will provide binding arbitration for dealers to appeal terminated franchise agreements.

In June, Auburn Hills, Mich.-based Chrysler forced 789 dealerships, which account for about 25% of its dealer network, to close. Detroit-based GM refused to renew franchise agreements with some 1,100 franchises, though they aren't required to close until October and many have not publicly identified themselves, The New York Times reports.

The automakers embarked on the review to resolve complaints from the dealers and action by members of Congress about the closures.

Too Little, Too Late?

"It's a good idea, but it's kind of late, isn't it?" said John Wolkonowicz, an analyst at consultant IHS Global Insight in Lexington, Mass. While the closings could have been handled better, the new plans will "help some dealers. It's a good thing and an upfront thing to be doing," Wolkonowicz told Bloomberg News.

GM and Chrysler sought to reduce the number of dealers as part of their reorganization plans, arguing that their dealer networks were bloated. Both emerged from bankruptcy protection earlier this summer.

The companies' decision to reassess closures was met with skepticism by the National Automobile Dealers Association, a leading trade group, which declared GM's proposal unsatisfactory and said Chrysler's plan lacked detail.

NADA said it appreciated the "good faith effort" on the part of both car companies, but added it "will also continue to work with Congress on the pending 'dealer rights' legislation in the event a nonlegislative solution cannot be achieved on this important issue."

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