Former Chrysler dealers hold on for compensation

By @ibtimes on

ST CHARLES, Ill - Nearly five months after Chrysler Group LLC emerged from bankruptcy under the leadership of Italian automaker Fiat SpA, Rocco Massarelli faces almost certain ruin.

It's dead here, said Massarelli, owner of a Chrysler, Jeep and Dodge dealership that the U.S. automaker terminated as part of its bankruptcy process, waving a hand wearily at the empty showroom he has tried to turn into a used-car dealership and parts center. A few used cars stand in the large parking lot awaiting sale. We're losing money here every month.

Founded by his father three decades ago, Massarelli's dealership franchise in this Chicago suburb of around 40,000 was one of 789 -- out of a total of 3,181 -- that Chrysler terminated in June with just a few weeks notice.

Bitter does even begin to describe Massarelli's feelings toward the company he said was once virtually a member of the family. Massarelli said he bought the local Dodge franchise for $1.7 million at Chrysler's request just three years ago and made improvements to the dealership that have left him with a $4 million mortgage on his dealership for which he used his home as collateral.

The way that Chrysler has treated us is inhumane, he added. I've put my entire life into this business and the way this going I am going walk away with nothing.

Now Massarelli's hopes of getting some compensation are pinned on ongoing talks between disenfranchised dealers and Chrysler brokered by members of the U.S. Congress. Sources close to the talks say that should they fail, Congress could force Chrysler to reinstate dealerships.

Chrysler's chief executive, Sergio Marchionne of Italy's Fiat, is scheduled to present his five-year strategy for the company in Detroit on Wednesday.

'SAD BUT NECESSARY'

Amid the worst U.S. auto sales in decades and burning through cash, Chrysler and fellow U.S. automaker General Motors Corp were forced into bankruptcy earlier this year as part of a controversial rescue bid engineered by the administration of U.S. President Barack Obama.

To receive aid the two automakers had to shutter plants, shed thousands of jobs and slash their dealer networks.

Chrysler argued that slashing its dealer network was necessary and received bankruptcy court approval.

A number of factors were taken into account, including profitability, said Chrysler spokeswoman Kathy Graham. Taking into consideration market share and the number of dealers in a given area, Chrysler aimed to shrink itself to match a U.S. car market likely to have sales of 10 million vehicles this year, down from 17 million in the peak year of 2005, she said.

This was difficult process that affected a lot of Chrysler workers and suppliers, Graham said. Cutting our dealer network was a sad but necessary part of that process.

Dealers who lost their franchises argue state franchise laws should have protected their businesses.

Those laws were in place to protect us, said Alan Spitzer, who lost seven of his eight Chrysler dealerships in Ohio and is a member of the Committee to Restore Dealer Rights, which is representing disenfranchised dealers. There is no way dealers would spend millions of dollars on their businesses if there weren't laws to safeguard those investments.

What happened to us was un-American, he added.
Others like Regina Alexander of Arnold Motor Sales Inc in Superior, Arizona, said as well as hurting dealers Chrysler has done itself serious harm to its former customer base.

The damage has been to the brand and not to us, said Alexander, whose business has been in her family for decades. We have people who come and say 'we will not buy another Chrysler product because of how this was all handled.'

Many terminated dealers also say they were profitable and successful, easily meeting Chrysler's criteria for avoiding termination. They allege that less successful dealers were spared while they were not.

We were consistently one of the top dealers in our region, said Colleen McDonald, who lost both of her Chrysler dealerships in Detroit in a business started by her father. But I was never one of the boys or toed the corporate line, so now we're out of business, she said.

McDonald and other dealers maintain the downturn in auto sales was already forcing unprofitable showrooms across the industry to shut down -- some 900 nationwide in 2008, according to the National Auto Dealers Association. Market forces would have thinned the ranks through natural attrition, they said.

Their focus now is on talks brokered by members of Congress to try to find a way of compensating disenfranchised dealers.

An appropriations bill passed by the U.S. House of Representatives in summer 2009 would reinstate all of those dealers. But sources said the talks are aimed at brokering a compromise rather than legislation that would be costly for Chrysler and embarrassing for the government that rescued it.

Dealers like McDonald say they would rather receive compensation than be reinstated. After what Chrysler has put me through I want nothing to do with them, she said. (Additional reporting by Tim Gaynor in Superior, Arizona; Editing by Peter Bohan and Steve Orlofsky)

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