Chrysler Group has persuaded many arbitrators that dealerships without all its brands were expendable, but three recent cases show that cracks are appearing in that strategy as arbitrations head into their final month.
Arbitrators have begun challenging Chrysler's Project Genesis plan of consolidating all brands in each dealership. They also have used dealership performance data recently made available for both rejected dealerships and nearby rivals to question Chrysler's judgment in terminating one and not the other.
Whether three decisions this month constitute a trend or just random judgments is not clear, especially since Chrysler has been winning cases at a rate of about 3 to 1.
But U.S. Bankruptcy Judge Arthur Gonzalez's decision last month to unseal sales and financial data for rejected dealerships and their rivals may be having an impact.
"Having data on both dealers opens up opportunities for dealers in arbitration that they didn't have before, especially if the dealer has good performance facts," said Michael Sieving, a lawyer in Santa Ana, Calif.
Dealer lawyers also have had more opportunity to share information and coordinate strategy.
"Chrysler has come with pretty much the same mantra since arbitration started, and we've been learning how to address it," said lawyer Eric Bowden of Bloomfield Hills, Mich.
Chrysler said it had 25 wins and nine losses as of June 11. Since then, Automotive News has confirmed two more defeats, though it is not yet clear how many more wins the company has had.
The automaker also said at the time it had fewer than 85 arbitration hearings left before the July 14 deadline. Chrysler declined to comment on the recent cases and on arbitrators' criticism.
Terminated dealerships that prevailed over Chrysler in April and May did so largely on the strength of their own business performance rather than by arguing that the company's decision making was flawed, an Automotive News review has shown.
But in a California case this month, an arbitrator expressed skepticism about the Genesis strategy.
After Star Chrysler-Jeep of Glendale was closed a year ago, the Jack Ellis Dodge store several blocks away was turned into a Genesis dealership.
But Jack Ellis "has not successfully penetrated" the market, arbitrator Rebecca Callahan said.
Chrysler "presented no evidence to show that reducing the number of dealers or consolidating its brands under 'one roof' has increased sales or market share for New Chrysler's product lines in the San Fernando sales locality, the Glendale market area, or at all," the June 6 decision said. "Project Genesis needs to take a back seat to sales."
In a New York case, an arbitrator ruled June 8 that Chrysler made the wrong choice in closing Terry Chrysler-Jeep in Burnt Hills while favoring a dealership eight miles away that it hoped to turn into a Genesis store. Terry's rival later went out of business.
The dealership introduced comparative performance data unsealed by Gonzalez.
"We couldn't have proved that Chrysler didn't follow its own business plan in this case without the spreadsheet data," said John Gentile, Terry's lawyer.
In a Texas case, the arbitrator faulted Chrysler for prohibiting Bert Ogden Harlingen Motors of Harlingen from relocating.
The dealership's results would have improved if it had been allowed to move, as the store "would seem to exactly fit Chrysler's business plan as stated by Chrysler's witnesses," the June 14 decision said.