Chrysler to Reward Dealers

The Wall Street Journal

DETROIT—Chrysler Group LLC plans to reward about three-quarters of its dealers with financial payouts of as much as $200,000 under a new program geared toward boosting customer satisfaction.

About 1,750 dealers will receive an electronic cash payment under the "Dealers Standards" program initiated by Chief Executive Sergio Marchionne. The rewards, to be paid out over the next week, range from $1,500 to $200,000, with the national average of $12,200.

Dealers were evaluated on the operation of their stores and customer care by Chrysler and three outside firms hired by the auto maker. The outside firms used mystery shoppers and official appointments.

"Our emphasis this time around was much more on customer care but the focus will continue to change throughout the year," said a Chrysler spokeswoman. Dealers will be notified of the results during a conference call later Friday.

The program is another step Marchionne is making to entice dealers to boost their efforts as he attempts to revive the struggling auto maker. Mr. Marchionne runs a similar program within Fiat SpA where he also serves as CEO.

The payouts also come as Chrysler's arbitration process to drop dealers from its network intensifies. About 250 dealers are pursuing arbitration to rejoin the network after Chrysler decided last year to stop supplying 789 dealers with new vehicles as part of its bankruptcy process.

Congress later mandated Chrysler to engage in arbitration before cutting the dealers. Chrysler has won three out of four cases in which a decision was rendered through Friday. More than 50 hearings in states throughout the country are scheduled to take place next week.

Deland Dodge, in Deland, Fla., won its case earlier this week. It is now waiting for Chrysler to finalize details and begin shipping vehicles. "I think in their selection of the 789 dealers there had to be a mistake in who they terminated," said owner Gil Dannehower about why he fought to rejoin the network.

Dealers Call Chrysler's Reinstatement Offers 'Ridiculous'

The Detroit News

Chrysler Group LLC's letters of intent to reinstate franchises -- sent to 50 dealers -- include conditions that dealers described Wednesday as onerous and ridiculous.

A copy of the letter, obtained by The Detroit News, is a laundry list of conditions and means for Chrysler to terminate any reinstatement offers.

"These so-called 'letters of intent' are absolutely ridiculous. This is the same nonsense they pulled throughout months of our negotiations to find a non-legislative solution to restoring dealers," said Tammy Darvish, owner of Chrysler and other brand dealerships in Silver Spring, Md.

A company spokeswoman described it as a standard letter of intent.

"Chrysler Group is speaking with the dealers involved; we have not released any additional information at this point in time," the automaker said in a statement.

Chrysler terminated 789 dealers last June, and since then 36 have been reinstated. An additional 50 started receiving letters this week that would allow them to pursue reopening their franchises.

Among Chrysler's stipulations outlined in the letter: Should "anyone file a protest or lawsuit, demand arbitration or otherwise challenge" the proposed reinstatement, or if the matter is not dismissed or resolved within 30 days, Chrysler can unilaterally stop the reinstatement.

If there is no challenge, the dealer to be reinstated will be notified and has 90 days to submit architectural plans that meet specifications that include arches as part of the exterior, and use specified materials.

The dealership also must also have customer lounges consistent with the vehicle brand, plus covered service drive-in areas, a children's play area, refreshment section, Mopar accessory display area and specific signs.

Once the plans are deemed acceptable, the dealer has 90 days to begin construction.

There are financial requirements to cover inventory as well as working capital, and reinstated dealers must enter into a minimum five-year lease.

During those five years, the dealer cannot protest or challenge any Chrysler decisions to put another dealer in the vicinity.

Dealer responses must be completed and returned within 10 days, and those who accept must withdraw their arbitration demand they have filed with the American Arbitration Association. In December, Congress mandated arbitration for Chrysler and General Motors Co. dealers who were terminated by the automakers as part of their respective bankruptcy restructuring.

Chrysler dealers have 60 days to file a site proposal. If Chrysler doesn't approve it within 30 days, it is deemed automatically rejected.

The letter of intent expires in 90 days if the facility the dealer plans to use meets Chrysler's conditions; it expires in eight months if renovations are necessary and in 18 months if the dealer is building a new facility.

Failure to meet any deadlines can result in termination of the offer in the letter.

"They have zero intention of being decent about this," Darvish said.

Jack Fitzgerald, who has dealerships in Maryland and Pennsylvania and is a leader of the lobby group Committee to Restore Dealer Rights, agreed.

"Chrysler is not dealing in good faith," he said.

Neither Darvish nor Fitzgerald has received a reinstatement offer.

GM sent letters of reinstatement to about 660 of its 2,000 terminated dealers. The GM letters were standard and reasonable in their terms, said Mike Charapp, a partner with Charapp & Weiss LLP in McLean, Wash., who represents dealers who have been terminated by both automakers.

"I have not seen that detail in a letter of intent before," Fitzgerald said of the Chrysler terms.

Chrysler said last week it also is seeking to resolve disputes with other dealers -- those who aren't being offered reinstatement -- outside of arbitration.

About 400 disenfranchised Chrysler dealers filed for arbitration, a process that must be wrapped up in June.

Chrysler Dealers, Used And Dumped, Fight Back

Story from the New York Times

DETROIT — The calls from Chrysler officials were coming nearly every day, sometimes several times a day, right through the final weeks before the company filed for bankruptcy. And the message, said Robert Archer, who runs three Chrysler dealerships in the Houston area, was simple: Take more cars.

"They tell me, 'The only way that we can survive is if you order cars and Fiat and the government see money coming in,' " Archer said.

He acquiesced, Archer said, thinking he was doing his part to save the company. "I'm a team player and I don't want them to go out of business, so I ordered a ton of cars."

Then, a week ago, Chrysler told Archer, a dealer for three decades, that his three stores were
among the 789 dealerships the company was eliminating as of June 9. Archer had 700 new vehicles and $1.7 million in new parts in stock when the letters arrived.

Now Archer is among 330 dealers, calling themselves the Committee of Chrysler Affected Dealers, who are contesting the company's action. This week and on June 3, the bankruptcy judge handling Chrysler's case will consider their objections.

Many of those fighting the hardest are dealers who recently spent huge amounts of money to stay in Chrysler's good graces, who sacrificed their own profits to help keep the company intact or who otherwise thought they had bent over backward to ensure that Chrysler could survive, only to learn that they were the ones who would not.

"I'm mad at myself for being duped all these years by them and going along with all of the things they wanted me to do," said Homer Cutrubus, a Chrysler dealer in Utah since 1969. "If I treated my customers like Chrysler treated me, I wouldn't have any business."

For years, Chrysler had been urging Cutrubus and other dealers to combine dealerships with just one or two of the company's brands into "alpha" stores selling all three: Chrysler, Dodge and Jeep. It stepped up that pressure in February, he said, and in April he finally agreed to move his Dodge store in Layton, Utah, into a Chrysler-Jeep showroom half a mile away, even though he thought the change made little sense financially and had to be done at his own expense.

Included in the exhibits filed in bankruptcy court is an e-mail message from a Chrysler official in Denver to Cutrubus that said the company wanted to keep only one of the four area dealerships, preferably him. It concluded, "Are you our guy?"

"I called them the next day and said, 'Yeah, we've got a deal,' " Cutrubus said. Six weeks later, after he already had spent $100,000 making the move, he got the letter cutting all his franchises.

Chrysler executives last week defended their decision to cut a quarter of its dealers and the process they used to determine which dealers should be eliminated. They said stores were evaluated on a number of factors, including sales, customer satisfaction, location and condition of the dealership.

If Chrysler does not streamline its operations and complete the proposed sale of its good assets to the Italian automaker Fiat, "the stark reality is all 3,181 dealers will face elimination," Steven J. Landry, the company's vice president of North American sales and marketing, said in a statement.

"It was not an easy decision to ask the court to reject a portion of our dealer contracts, but the reality is Chrysler's viability depends on a vibrant, profitable dealer network," Landry said. "As presently configured, Chrysler's dealer network does not meet that test."

Landry also argued that the company "is treating the rejected dealers fairly by assisting in the redistribution of remaining vehicle and parts inventory, paying incentive and warranty payments due."

But many dealers disagree.

Chrysler is not buying back any inventory, including the vehicles and parts that dealers say they never wanted and bought only under pressure. And the entire process, which gives them only until June 9 to liquidate everything, is far from fair, they contend.

The company's actions have bewildered William Coulter, a dealer in Phoenix. Several years ago, Coulter spent $2.7 million to buy out a competitor because Chrysler wanted him to sell all three of its brands. More recently, he paid $3.5 million for 12 acres of land in a more upscale, fast-growing suburb. Chrysler approved the relocation, but Coulter had to delay moving because the recession had cut deeply into sales.

"All the local people were telling us we had nothing to worry about," he said. "We were pretty confident, having invested all this money. And after making all these investments, I don't have a choice."

Chrysler said 89 percent of the dealers being cut sell more used vehicles than new ones and are, therefore, expected to keep selling and servicing used vehicles. It said 44 percent of the dealers being cut also sell a competing manufacturer's vehicles at the same store, something it does not like.

In Panama City, Fla., Buzz Leonard Chrysler Jeep used to also sell cars from Mazda and Mitsubishi. But the owner, Gerald Spitler, dropped the Mazda franchise a year ago and in February he paid $200,000 to give up Mitsubishi, even though it did decent sales, to show that he was fully committed to Chrysler. Right before Chrysler filed for bankruptcy, he said, he tried to help the company by taking on 25 new vehicles, when he needed only 10.

"I was told several times that I was doing all the right things and that going forward I was going to be one of their guys," Spitler said. "I thought I was right on track with them. I thought this was going to be fun."

On May 14, Spitler learned that his efforts were wasted, while the Dodge dealer across the street, which also sells Lincoln, Mercury and Hyundai, would survive.