Chrysler may face fine over L.A. store
Dealership sale moves forward; settlement sought with Calif. DMV
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Chrysler Group and the California Department of Motor Vehicles are negotiating to settle the department's accusations that Chrysler has illegally operated a factory-owned store in downtown Los Angeles.
The DMV also accused Chrysler of making false statements to the department about ownership of the dealership, Motor Village LA. Chrysler is using the dealership to test new retail techniques and to increase exposure of its Chrysler, Dodge, Jeep, Ram and Fiat vehicles in Los Angeles, where its market share is small.
A settlement could include compensatory damages. When the DMV filed the accusations Sept. 14 with the California Office of Administrative Hearings, it asked that Chrysler pay restitution to competing private Chrysler Group stores within 10 miles.
A DMV spokeswoman declined to comment on pending litigation. She said that if the two parties cannot agree on a settlement, a hearing will be set. Chrysler could face a fine, warning, probation or loss of its California license to sell vehicles.
 | Peter Grady: Chrysler's deal to sell the Motor Village store to Dennis Lin should close by the end of October. |
'Clearly some missteps'
Peter Grady, Chrysler's head of network development and fleet, told Automotive News last week that Chrysler is working to quickly sell the 189,000-square-foot Motor Village store. The prospective buyer is Dennis Lin, owner of New Century Automotive Group in North Hollywood, Calif.
Under the deal, which Grady expects to close by the end of October, Lin will buy the dealership and Chrysler Realty will continue to own the property.
Grady declined to discuss how much rent Lin would pay but said: "We now have a rent that's competitive with what they [private dealers] pay themselves" on bank loans.
The California New Car Dealers Association has estimated the market rent on Motor Village at $200,000 a month.
Gwen Young, a Chrysler attorney, told a Sept. 27 meeting of the California New Motor Vehicle Board that the company was working with the DMV on a settlement: "Chrysler Group really does want to put all this behind it and move forward."
Ramon Alvarez, president of the vehicle board, cautioned Chrysler at the meeting.
"There were clearly some missteps that were taken, and it looks like you're rectifying them," he said. "But you've got to get on the right foot once going forward. It is important for your company to get into that track."
Young told Alvarez and the seven-member board that Chrysler's management team has "put a number of controls in place" to "revamp the entire program so that nothing like this will ever happen again."
The DMV said that Chrysler falsely claimed that Motor Village was part of its dealership development program. California law prohibits the operation of a factory-owned store within 10 miles of competing private franchisees unless the dealership is part of such a program.
Three competing dealerships are within 10 miles of Motor Village, according to the department's Sept. 14 document: Glendale Chrysler-Jeep-Dodge, California Superstores Chrysler-Jeep-Dodge and CarMax Chrysler-Jeep-Dodge.
Jumping into the fast lane?
Chrysler faces a challenge in California, where its market share was a paltry 4.9 percent through August. In Los Angeles it was even lower: 3.9 percent. Nationally, it was 10.4 percent.
Dealer David Ellis of Glendale Chrysler-Jeep-Dodge spoke to the Sept. 27 hearing about Chrysler's conduct. He likened the automaker's attempts to play catch-up to a driver illegally using the high-occupancy lane on a Los Angeles freeway.
"I don't know what they were thinking, but the way they operated in the last couple of years, they're in such a rush to get market share," he said.
"There are lots of times I'd like to get in the fast lane and move," he said. "Well, Chrysler got in the fast lane with one person, and now they've got to pay a fine."
You can reach Bradford Wernle at bwernle@crain.com.
