WASHINGTON (Dec. 9, 2009) — House and Senate leaders agreed to a legislative proposal to give rejected General Motors Co. and Chrysler Group L.L.C. auto dealers access to third-party arbitration under criteria broader than that planned by the auto makers.
House Majority Leader Steny Hoyer, D-Md., and Assistant Senate Majority Leader Dick Durbin, D-Ill, said late Tuesday that the bill would require arbitrators to balance the economic interests of car dealers, the companies and the public.
Dealers who appeal their termination and win in arbitration would receive a letter of reinstatement from GM or Chrysler within seven business days of the arbitrator's decision, the joint statement said.
The bill—whose enactment is now virtually assured—is to be attached to a financial services spending measure and considered by a conference committee of congressional leaders this week. It then will be submitted for final votes by the House and Senate before going to the White House for President Barack Obama's signature.
The agreement was praised by the National Automobile Dealers Association (NADA) and the Committee to Restore Dealer Rights, a rejected-dealer group that had pushed most aggressively for dealer reinstatement.
The bill “establishes a fair, neutral, transparent and balanced arbitration procedure for all dealers who lost their franchises this year,” Committee leader Tamara Darvish said.
NADA said in its statement that the bill would “provide a fair process to address dealer concerns about the recent closure of General Motors and Chrysler dealerships.”
GM and Chrysler last week broke off settlement talks aimed at avoiding legislation and announced plans to give rejected dealers access to third-party arbitration.
Arbitrators under the auto makers' plans were to apply the original criteria used by the companies in marking them for termination.
Dealer groups said few dealerships would be restored under these criteria because they were circular and self-fulfilling.
Chrysler was to start implementing its plan this week, and GM next month.
Last night's legislative agreement falls far short of a bill pushed by dealer groups to reverse closures of 789 Chrysler showrooms and the planned termination of 1,350 GM dealerships by October 2010. That bill passed the House last summer but stalled in the Senate.
The bill proposed last night would preserve the right of auto makers and dealers to enter agreements outside binding arbitration, the statement from lawmakers Hoyer and Durbin said.
But if dealers seek independent arbitration, arbitrators would have to consider a number of criteria.
Arbitrators would have to assess the dealership's profitability over the last four years, the statement said. They also would have to evaluate its economic viability, including how well capitalized the dealership was at the time it was designated for termination.
Arbitrators also would have to consider any local conditions—such as the economy or a natural disaster—that might have contributed to a poor sales performance, the statement said.
Impact on other dealers
At the same time, though, arbitrators would have to consider the impact that reinstatement would have on other car dealers in the area. They also would have to evaluate how the dealership “supports the company's post-bankruptcy viability plans,” the statement said.
Finally, arbitrators would have to assess how well the dealership met the company's business objectives, including sales, profitability, capitalization and customer service.
“It is imperative for both auto dealers and auto companies to have a transparent process that gives dealers a chance to make their case for remaining open, while respecting the companies' need to return to profitability,” Mr. Hoyer said.
The legislative agreement contains no compensation for rejected dealerships. In September, dealer groups had proposed compensation of $3,000 per vehicle sold in a recent year of the dealer's choosing.
This report appeared on the Web site of Automotive News, a Detroit-based sister publication of Tire Business.