Even as Chrysler unveils its brand new bailout bait (a.k.a. prototype electric vehicles), the ailing American automaker has finally unleashed its long-promised Holy War on “under-performing” dealers. Lawyer Richard N. Sox, Jr., Esq.’s column in Dealer Magazine reports that the Keystone State is Ground Zero in ChryCo’s campaign to shed stores. “Chrysler has finally pulled the trigger on sending out notices of termination. As of this writing, Chrysler has apparently sent 10 Pennsylvania dealers a notice that their franchises are being terminated. It is unclear why Pennsylvania appears to be the test market for these termination actions. We know from experience that Pennsylvania’s franchise protections are relatively strong compared with many other states. It may be that these dealers are particularly poor performers and thus the easiest termination cases to win.” Mr. Sox gets his Gox box socks on and sets about cleaning ChryCo’s clock (while we play the “Pennsylvania” drinking game). Suffice it to say, “Under federal and state price discrimination laws, the VPA program is illegal in a situation where the dealer MSR is inappropriately inflated such that the dealer can’t qualify for VPA incentive monies.” Or, more prosaically, “There is a strong claim for damages, which should certainly get Chrysler’s attention and give the dealer added leverage in fighting a termination action.”
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Not very well thought out on Chrysler part; where are they going to store their inventory for free if they get rid of dealers?
Expect this to be resolved in the Supreme Court in 2016. At which time the case will be dismissed because Chrysler will be long gone.
Attorney Sox makes a living by representing dealers in disputes with auto manufacturers, so the article should be treated as advocacy as much as analysis. Now, it could well be that ChryCo hasn’t a wheel to stand on, and the courts will side with franchisees. Still, I wonder if there’s a middle course to be explored.
The heart of the issue is that many dealers sell too few cars. We’ve all heard about franchisees surviving on service business and used car sales. So how about two classes of franchises: the traditional arrangement, and one wherein stores are allowed to perform warranty work, get full access to parts, and get factory training for the technicians. The “traditional” dealers might dislike the competition for repair work, but their new and CPO vehicle sales would go up. Buyers of used Chrysler vehicls would also have the assurance of better access to factory-trained mechanics as they travel around the country.
While I understand that most state franchise laws prohibit factory owned dealers – but what about factory owned service depts?
If dealers are making money on service then clawing that business back would be at least a cost savings as company owned service centers would in essence be doing the work for cost (no need to make a profit).
Feasible, no?
Part of good generalship is choosing the most advantageous field of battle for your forces.
None of the 2.8 are nimble or innovative enough to outwit the dealers and their own state legislatures with ideas like that of 50Merc (though with access to the contracts and a couple lawyers many of us here could likely come up with all sorts of good ideas). The brute force legal approach on some test cases could be followed up with: “Seeing what happened to those guys in PA, you might want to take our cash offer for termination.”
That may be their best plan given their strengths.
I think that guy sold me undercoating and Teflon sealer.
50merc: “So how about two classes of franchises: the traditional arrangement, and one wherein stores are allowed to perform warranty work, get full access to parts, and get factory training for the technicians.”Didn’t Mercedes-Benz have something like that at one time? Seems like I recall seeing Mercedes service centers but I don’t know if they still exist now or not. Regardless, it would be a good way to gauge the success of such an arrangement.
Did Chrysler honor its obligation to provide dealers with salable merchandise; desirable, quality vehicles that offer consumers satisfaction and value for money relative to competitors?
Oh, the dealers are just mad because they want a minivan with German engineering, too.
One problem with the reference to the VPA program, it was eliminated Jan. 1,2008. In the new program all dealers are paid at the retail delivery regardless of MSR attainment. With this kind of research he’ll get blown out of a courtroom by Chrysler’s lawyers.
Notwithstanding his other foolish utterances, Robert Lutz was dead on when he stated, a few years ago, that Detroit is bigger than its market. Too many plants, too many workers, too many dealers. (Too many retirees, also, but only time will fix that.) Because the pie has to be divided into so many pieces, none of them is big enough to survive on. Getting rid of the least productive dealers will give the others a better chance to succeed.
I wonder if they’ll let the customers speak at the hearing??
What’s that? They did the lost your keys scam? How’s that work?
Oh. The used car manager suddenly disappears with your keys when you decide to leave without buying a car, huh??
Well, your honor, would you like this dealership to represent your company?
And THAT folks is an example what smelling that new car smell can do to you… (plastic and paint fumes)
Not serious – just digging for fun.