State auto dealers hope for reprieve
Chrysler franchises slated to close Tuesday
Executives with Chrysler auto dealerships targeted for closure Tuesday crossed their fingers Monday in hopes of receiving some last-second positive news from the courts — and may have gotten some.
According to published reports, the U.S. Supreme Court late Monday ruled in favor of some Indiana state pension and construction funds to at least temporarily halt the sale of most of bankrupt Chrysler's assets to Fiat. An appeals court in New York had approved the sale Friday, but attorneys for the funds appealed to the Supreme Court on Sunday.
The court's stay grants the funds more time to air their objections to the sale.
Another key legal case involving objections by Maryland, Ohio and Illinois officials to Chrysler's proposed termination of dealers is slated to be heard Tuesday in a federal bankruptcy court in New York.
"Everything is still up in the air," Rick Shaub, owner of Montrose Dodge in Germantown and one of 15 Maryland dealerships on the targeted list, said Monday afternoon. "There is still a possibility we will remain in business."
Shaub said he has had no help from Chrysler in selling his inventory to other dealers. But he has made some transactions himself with dealers.
"I don't know how we will be paid for everything," said Shaub, whose grandfather started the family-owned dealership in 1945.
Maryland law provides that manufacturers cannot terminate a dealer's franchise unless given 90 days' written notice. Chrysler gave dealers less than a month. Shaub said he understands such a state law does not pertain to manufacturers in bankruptcy.
Raquel Guillory, a spokeswoman for Maryland Attorney General Douglas F. Gansler (D), said that office is waiting to see how the bankruptcy court will rule on the states' objections before deciding what to do.
Another Maryland law that took effect last week allows a terminated dealer to be paid for the costs of new vehicles acquired within 18 months of the cancellation, unsold parts, signs and any improvements to the dealerships required by the manufacturer.
"While Chrysler should be allowed to restructure in bankruptcy, it must do so consistent with state laws," Gansler said in a statement. "Our objections contend that the proposed terminations fail to recognize protections provided for dealers under Maryland law."
Fiat has agreed to honor the "Lemon Law" rights of Chrysler buyers after taking control, Gansler said.
The Washington Area New Auto Dealers Association met Monday in McLean, Va., with local dealers from Chrysler and General Motors to discuss their manufacturers' respective bankruptcies. Many dealers are shocked by the situation and unclear about their rights, said John O'Donnell, executive vice president of the association.
Chrysler and GM have not provided "any financial justification" for terminating dealerships, O'Donnell said.
Also on Monday, the Automobile Dealer Economic Rights Restoration Act of 2009 was introduced in Congress, designed to "restore the economic rights of automobile dealers in order to protect jobs, workers, and small business owners," according to a statement by one of its supporters, Rep. Christopher Van Hollen Jr. (D-Dist.8 ) of Kensington.
"Our efforts to revitalize the auto industry in America must include a vibrant dealer network to sell and service first rate GM and Chrysler products," Van Hollen said.
The bill would do the following, he said:
Restore the economic rights of General Motors and Chrysler car dealers as they existed prior to each company's bankruptcies.
Preserve General Motors and Chrysler car dealers' rights to recourse under state law.
At the request of an automobile dealer, require General Motors and Chrysler to reinstate franchise agreements in effect prior to each company's bankruptcies.
Make clear that the legislation is not intended to make null and void the court-ordered transfer of assets from Chrysler to New CarCo Acquisition or the transfer of General Motors assets that could be approved by a court after the introduction of the act.