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Over 1,200 Ousted Dealers File for Arbitration

GM’s Whitacre says, “We’ll get through this.”

by on Jan.25, 2010

"We'll get through this," says GM CEO Ed Whitacre as ousted dealers get ready for arbitration.

They have until midnight to file their claims, and General Motors’ new, full-time CEO expects there’ll be some more dealers rushing in to demand aritration before time runs out.  But as of mid-afternoon Monday, more than 1,200 ousted GM and Chrysler dealers have taken the first critical steps necessary to winning back their franchises.

As part of their bankruptcy filings, earlier this year, the two automakers announced plans to eliminate more than a third of their dealers, in a bid to streamline their retail operations.  But the politically well-connected dealers didn’t go quietly into the night and Congress passed legislation giving the retailers a chance to fight back.

The final tally seeking arbitration could come close to half of the roughly 2,000 dealers cut by GM and 789 Chrysler slashed.  The numbers were growing rapidly, the industry trade publication, Automotive News, noted, reporting that as of Friday, only 959 dealers had paid at least $500 of the $1,625 filing fee.

How many of those dealers will actually pursue reinstatement is unclear.  Records show that only a third of business arbitration cases go to conclusion, not all favorably for the filers.  But considering the potential multi-million dollar losses involved in the closing of a showroom, observers say it’s a safe bet to at least begin the arbitration process while there’s still time.

It’s unclear how long it will take for the suits to work their way through the system, though Congress set a six-and-a-half month deadline for the process.  It’s possible that some dealers will settle while others will abandon their efforts.

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Earlier this month, GM CEO Ed Whitacre acknowledges that “mistakes” were made in the system the automaker used to choose which dealers to cut.  At the time, he suggested “hundreds” could be reinstated, though he later suggested that might mean a number of around 150.   Hours before the filing deadline, Whitacre said he was confident that even being forced to take back some dealer “will not impede our progress.”  Speaking to reporters at a news conference called to announce his appointment as full-time, rather than acting CEO, the 68-year-old Texan said, “I’m not sure it’ll weaken us.  I’m anticipating we’ll get through this.”

His counterpart at Chrysler, Sergio Marchionne, has not been so upbeat.  During a media roundtable, earlier this month, the CEO defended the process by which Chrysler dealers were cut and indicated the company could take legal action if it wasn’t pleased with the results of the forced arbitration.

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