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Chrysler May Re-Hire Nearly 100 Dealers

Maker reportedly backing off on hard-line stance.

by on Mar.25, 2010

Chrysler could reinstate as many as 100 dealers fired last year. The termination left outlets, like this one in Mt Clemens, MI, scrambling to find ways to stay in busiess.

Chrysler is reportedly ready to bring back as many as 100 of the dealers that it terminated, last year, as part of its bankruptcy.

The news – still unconfirmed by the smallest of the Detroit makers – comes just three weeks after General Motors also reversed course, re-hiring 661 of the dealers it fired in an effort to consolidate its retail network.

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The Detroit Three, as a group, have been trimming their distribution chains, in recent years, taking a page from import brands, like Toyota and Mercedes-Benz, which have found that fewer showrooms can actually improve sales and profitability.

As part of their separate bankruptcy reorganizations, last year, GM terminated more than 2,000 retailers, roughly a third of its total.  Chrysler, meanwhile, dropped 789.  But where the larger maker said its dealers would have up until the end of 2010 to phase out their operations, Chrysler’s termination plan was effective immediately, leaving retailers to scramble to find ways to unload unsold products and, if possible, line up new lines of business.

Late last year, GM began giving signals that it was rethinking its strategy, with CEO Ed Whitacre openly admitting there were “mistakes” made among the mass firings.  Earlier this month, it announced it would rehire those 661 retailers and enter arbitration with 100s more hoping to hold onto their GM franchises.

Chrysler, on the other hand, has maintained a hard-line stance, reinforced by CEO Sergio Marchionne, during the North American International Auto Show, in Detroit, in January.

But the maker is under the gun, what with it facing the prospect of being forced to rehire retailers who have filed for arbitration.  Sources indicate nearly 100 Chrysler retailers could be given a reprieve, according to several sources, including one dealer hoping to be reinstated — though was unable to reach company officials for confirmation.

The arbitration process was mandated by a rare bill that passed both houses of Congress with bipartisan support.  About half of Chrysler’s dealers sought to make a case for staying on with the company.

The arbitrator is required to look at a variety of factors, including not only the performance of the dealer but also the economic impact on the community the retailer serves.

Complicating matters is the fact that since the mass terminations were announced, last year, Chrysler has signed on dozens of new dealers, many located close to where the maker had shut down some of its retailers.  Observers warn that could create a serious legal thicket playing off the legal rights of the new franchisees against the provisions of the arbitration bill.

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