Chrysler, GM Offer Ex-Dealers Arbitration, But Dealers Resist

(MoneyWatch)  Nearly 3,000 dealers terminated by Chrysler and General Motors have gained some limited traction in their fight for some of them to be reinstated, but the dealers are far from getting their way, and time is not on their side.

Chrysler and GM argue that having too many dealers keeps prices down and forces dealers for the same brand to compete with each other, instead of competing with other makes. The dealers argue they were terminated arbitrarily and without regard to state franchise laws.

With an eye towards heading off possible legislation that could be more onerous to the car companies, Chrysler and GM now have both agreed to submit to binding arbitration for dealers who want their cases reviewed.

Later this week, Chrysler is set to send letters to 789 dealers it terminated, notifying them that arbitration is available. However, Chrysler also said it will require dealers rejoining the network to conform with the company's so-called Project Genesis standards for expensive, upgraded dealerships.

GM also said last week it will agree to review closings. GM earlier put about 2,600 dealerships on notice they will be closed next fall, and stopped shipping new cars and trucks to them. That number includes dealerships for franchises that continue under the "new GM," Buick, Cadillac, Chevrolet and GMC, as well as those GM is dropping, Hummer, Pontiac, Saab and Saturn. The latter are probably out of luck, regardless.

The main dealer lobbying group, the National Automobile Dealers Association, complained last week that the binding-arbitration proposals from Chrysler and GM fell short of providing a "realistic" chance at reinstatement.

The NADA said it intends to continue to push Congress for what NADA calls "dealer rights" legislation, despite the offers from Chrysler and GM.

A dealer advocate, U.S. Rep. Chris Van Hollen (D-Md.), called the offers from Chrysler and GM "a step in the right direction," but he said the move for pro-dealer legislation will continue.