WASHINGTON -- Chrysler Group prevailed in arbitration last week against two Texas dealerships, bringing the company's arbitration record to five victories and one defeat.
In Chrysler's win over Manuel Dodge, of Richardson, Texas, the arbitrator endorsed the company's Project Genesis strategy of trying to consolidate all brands under a single roof.
“Chrysler's new business model, and the existence of a high-volume, full-line dealership at this high-volume location, would bring more products to the surrounding community and to customers encountering the store at lower prices than would be available under Manuel Dodge's business model,” the arbitrator wrote, according to both a Chrysler spokesman and Manuel Dodge's attorney.
The arbitrator's May 12 decision continued: “Further, while Chrysler would have the authority to make Manuel Dodge a full-time dealer were it to be offered a letter of intent as a result of this proceeding, there is no indication that the dealership would be willing to change its sales style to more closely align its business model with Chrysler's preferred model going forward.”
Another Genesis case
A second Texas dealership, El Dorado Motors, of McKinney, also lost its bid for reinstatement last week, Chrysler said today.
The arbitrator's pro-Genesis reasoning in the Manuel Dodge case was similar to that used by another arbitrator in ruling against Joe Kidd Dodge of Cincinnati last month. Both dealerships had sold only Dodge vehicles.
Manuel Dodge's attorney, George Haratsis of Fort Worth, said the arbitrator's decision disregarded the intent of the December law that set up an arbitration process for rejected Chrysler and General Motors Co. dealerships seeking reinstatement.
“This completely ignores Congress' intent that a single-line dealer is eligible to be restored to Chrysler's dealer network,” Haratsis said. “If other arbitrators accept Chrysler's position, partial-line dealers will have little chance of success in arbitration.”
Neither Chrysler nor Manuel Dodge would release the text of the arbitrator's decision, citing confidentiality agreements.
Economies of scale
Chrysler has been trying for the past decade to put all three or four of its brands under one roof to achieve what the company says are greater economies that would yield increased investment in dealer facilities. Many of the stores closed during Chrysler's bankruptcy a year ago had only one or two brands.
About 83 percent of Chrysler's 2,320 dealerships are Genesis stores that house the Chrysler, Dodge, Jeep and Ram brands under one roof. The company said its goal is to have 100 percent of its dealer network as Genesis stores by the end of 2011.
Haratsis said Chrysler wants to establish a new Genesis dealership in Richardson, a Dallas suburb, in place of Manuel Dodge, which had been a Chrysler dealer since 1977.
There are two other Genesis stores in the area, each about nine miles away from Manuel Dodge's former site, he said.
Chrysler said in a statement: “This was an important decision in that the arbitrator essentially decided that no dealer in the market is better than diluting Chrysler Group's dealer network with a poor-performing dealer.”
Minimum sales responsibility
The arbitrator ruled against Manuel Dodge in part because of what he saw as the dealership's subpar performance on sales and profit, dealership owner Tommy Manuel said.
Manuel, 76, said his “minimum sales responsibility,” or MSR, score was between 70 and 80 percent, falling short of the 100 percent performance sought by the company. His store's score reflected the loss of jobs in the area several years ago, he said.
The arbitrator also held that dealership payments to its owner should be categorized as expenses rather than profit, Manuel said.
“It's the dealer's discretion to count it any way he wants to,” Manuel said in an interview. “I've never been screwed this bad in my life!”
Chrysler had approved Manuel Dodge to become a Genesis store about one month before the automaker's bankruptcy filing last year led to terminations of a quarter of the company's dealerships, Haratsis said.
“Nothing was ever communicated to him by Chrysler about being an alleged poor-performing dealer or that his MSR percentage was not high enough,” the lawyer said.
In the El Dorado Motors case, the dealership's managers did not respond to requests for comment.
Chrysler said of the El Dorado decision: “We are confident we now have the dealer network in place that allows dealers to be successful, which will result in greater investment in their communities, employees and customers.”
Chrysler has now prevailed in arbitrations involving two Florida dealerships, two Texas stores and one Ohio dealership. It lost to a Florida dealership.
About 550 Chrysler and GM arbitration hearings have been scheduled from mid-April to mid-July.