Legislation for Auto Dealer Rights is a Hollow Victory for Many

Last Updated Dec 10, 2009 10:42 AM EST

Congress came up with new language for proposed legislation to establish binding arbitration for ex-dealers for Chrysler and General Motors who want their franchises back.

The new proposal won the endorsement of the National Automobile Dealers Association and the so-called "dealer rights" legislation looks like it will become law.

However, it's obvious that it's too late for reinstatement, for many dealers who lost their franchises in the automakers' bankruptcy restructuring. Chrysler terminated 789 dealers last summer. GM put about 2,600 dealerships on notice they will be closed in the fall of 2010, and stopped shipping them new cars and trucks.

Many of the terminated dealers were financially crippled after only a couple of months out of the new-car business, plus the costs associated with winding down their original franchises.

Even if their franchises were handed back to them, many ex-dealers couldn't afford to go back into business, said Charles W. Pompey, whose family owned Pompey Dodge in Kingston, Pa. for 43 years, until Chrysler terminated the dealership in June.

"At this point, I don't even want my franchise back. I can't afford to risk my financial future with Chrysler again, like my family did before," he said in a phone interview today. He said Pompey Dodge was profitable when Chrysler closed it, which in his view makes the closing hard to justify.

"What would help me would be some financial restitution," he said, but according to Pompey, so far the proposed legislation looks as if reinstatement is the only potential recourse.

"The comparison is, it's as if somebody broke into your house and then they call you and say, 'We have all your stuff, you want to buy it back?' It just doesn't work that way. They took everything I would use to buy it back," Pompey said.

He said he can fall back on a separate body shop and collision-repair business, but he knows other dealers who have had to sell their houses, or declare bankruptcy. That means it's unlikely they could meet Chrysler's financial requirements for new-car dealers.

"There may be a small, select few who could get their franchises back, and I hope they do, I don't wish ill-will on anybody," Pompey said.

Photo: pompeydodge.com