WASHINGTON -- Even before Chrysler Group learned on Friday that it had won its first dealer arbitration case, the automaker began offering cash settlements to some rejected dealers who are in arbitration. Chrysler is trying to reduce litigation expenses.
Despite the small number of settlement offers reported by dealers, the step was another move away from the company's original hard line on arbitration.
Four Chrysler dealer lawyers and a dealer activist said they know of about 18 closed dealerships that have received offers since Tuesday, April 27.
Most of these offers have been for $25,000, with the range stretching from $20,000 to $200,000, they said. At least half the Chrysler dealers who received offers have rejected them, they say.
"The Chrysler offers are paltry in comparison with what the dealers' businesses were worth, and I expect most to turn them down," said Tammy Darvish, co-leader of a rejected-dealer group called the Committee to Restore Dealer Rights.
Darvish, who is a rejected Chrysler dealer, has filed for arbitration in an attempt to win reinstatement of her Fairfax, Va., and Jacksonville, Fla., stores. Darvish declined to say whether she received an offer.
She and four dealer lawyers said they knew of Chrysler settlement offers to dealers in Illinois, Michigan, California, Florida, West Virginia and Montana.
In a statement, Chrysler said it is making the offers "in an effort to find mutually beneficial alternatives to dealer arbitrations, to reduce the costs of litigation and to protect the existing dealer network."
The company added: "Resolving cases below anticipated litigation expenses makes good business sense."
Chrysler declined to say how many settlement offers it has made or the amount of compensation offered.
Mark Lyman, a Chicago lawyer who represents a rejected Chrysler dealership in arbitration, said it makes economic sense for the company to offer settlements.
Chrysler's expenses for a single arbitration may exceed $100,000 when fees for lawyers and expert witnesses are taken into account, Lyman estimated.
But Chrysler's offers fail to take into account dealers' perceptions of what their closed stores were worth, he said.
"There's very little incentive for dealers at this stage to accept Chrysler's offers," Lyman said. "The only circumstance where it makes sense for a dealer is someone whose tolerance for arbitration has been exhausted. But I don't know any dealers who feel that way."
In March, Chrysler offered to reinstate 50 closed dealerships out of the 387 that had filed for arbitration.
In contrast, GM has offered to reinstate 666 of the 1,160 dealerships in arbitration -- while offering to discuss possible settlements with the remainder.
GM's settlement offers have gone beyond compensation to include reinstatement hinging on dealership upgrades, store moves and sales goal achievement.
Lyman said Chrysler's arbitration tab could hit tens of millions of dollars -- at a time when the automaker is trying to get back on its feet after bankruptcy.
That makes a compelling case for the company to come up with settlement offers that are more attractive to dealers.
Said Lyman: "Chrysler may just be testing the waters now to see what dealers' tolerance is."