Chrysler’s awkward, year-long fandango with unwanted dealers is poignantly encapsulated in a strange little anecdote hidden in the back of today’s Automotive News [sub]. Headlined, “Rejected-store worker’s chat with Sergio was just smoke,” the piece told of a chance encounter several weeks ago between Fiat/Chrysler CEO Sergio Marchionne and culled dealer Jim Casper, while enjoying a smoke at a seafood restaurant bar.

“Are you a rejected dealer?” Marchionne asked [after Casper introduced himself].

“I work for a rejected dealer,” Casper replied.

“Do you know why you were rejected?” the CEO asked.

“To be honest, sir, we have absolutely no idea,” Casper said.

Now why would Sergio guess that Casper was with a “rejected dealer,” a term used by dealers protesting Chrysler on Youtube? It could have been awkward if Casper were just a good soldier looking for a pat on the back from his CEO. Actually, on second though, it couldn’t have been any more awkward than what (apparently) actually happened.

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Remember when we reported that the cash cow known as in-house dealer finance wouldn’t be covered by the Consumer Financial Protection Act, currently making its way through congressional committees? That version of the bill passed the House Financial Services Committee (with some questionable support), but now Automotive News [sub] reports that the Senate Banking Committee has passed its own version which does make dealer finance subject to regulation by the Consumer Financial Protection Bureau. The Senate version would also make the CFPB an office of the Federal Reserve, rather than a stand-alone agency. So, should an agency set up to prevent another financial crisis extend regulation to dealer finance operations? Dealers aren’t happy about the idea, but traditional consumer advocates aren’t the only ones saying yes…

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Chrysler Group understands that the practice at this time may be a cause of concern among policymakers and among arbitrating dealers. As a measure of good faith, Chrysler Group will not proceed with network actions that directly impact an arbitrating dealer until the arbitrator has had a chance to rule in that case.

GM earned some goodwill with dealers in recent weeks by reinstating over 600 dealers, most of them rural Cadillac stores. But as always, as soon as one grating issue in GM’s relations with its dealers is resolved, another one appears. Automotive News [sub] reports that GM is seeking five- and six-figure sums from what it terms “a very small” number of dealers who allegedly violated the terms of its Standards for Excellence Incentive program. This might be a relatively normal occurrence, if it weren’t made more complicated by GM’s recent bankruptcy. Because GM audited its dealers before bankruptcy, but didn’t act on the information until now, GM says that its penalties aren’t debatable, and that the normal audit process will not be available to dealers receiving the bills.
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GM’s recent reinstatement of 661 culled dealers has put pressure back on Chrysler to come to arrangement with the dealers it shed during last year’s bankruptcy and bailout. Rep. Chris VanHollen, the sixth ranking Democrat in the House or Representatives, tells Automotive News [sub] that with GM buckling to dealer pressure, the time has come for Chrysler to follow suit. “There’s no quicker or easier way to build this network than to reinstate its terminated car dealerships,” says VanHollen, who drafted much of congress’s dealer arbitration legislation. The Committee to Restore Dealer Rights contacted Chrysler CEO Sergio Marchionne “to discuss the reinstatement of the rejected dealers who had their franchises so abruptly taken and were unfairly terminated.” The response?

We believe that all communications concerning the subject matter of the arbitration should be between counsel and request that your clients follow this procedure in the future. Please ask them not to send such communications to Mr. Marchionne or any other Chrysler personnel.

Oh snap! Chrysler isn’t going down without a fight… even if that means taking on the representatives who have oversight of the government’s eight percent stake in the automaker.
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Chrysler’s troubled relations with its dealers took another turn for the nasty this week, as culled dealers teamed up with lawmakers to criticize Chrysler’s decision to open new dealerships near the sites of several culled dealers. As with GM’s dealer struggles, this latest controversy centers around Colorado, where culled dealers are protesting Chrysler’s behavior in the Denver Post. Culled dealers have seen franchises in their former areas awarded to chains like AutoNation before congressionally-mandated arbitration had even given them the opportunity to contest their culling during last year’s bankruptcy proceedings. “This is not right,” said one dealer. “We specifically asked (Chrysler) not to redistribute the franchise before our arbitration.”

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Chrysler’s long-disfunctional “Five Star Dealer” program may be on its way out, reports Automotive News [sub], as a new Fiat-created dealer rewards program rolls out to a Chrysler dealer body that’s fighting for survival. The new program, which may still be merged with Five Star, addresses several longstanding dealer complaints about Five Star, perhaps the most important of which is third-party verification [to be done by the Swiss audit firm SGS Group]. Given the deep mistrust that exists between Chrysler dealers and the mothership, bringing in outside auditors to perform certification was probably a prerequisite (and brings the Chrysler program in line with Ford’s practice of independent dealer rewards program auditing). But the biggest change also helps explain why Chrysler employees will no longer judge dealerships: instead of a mere star rating system, now there’s money at stake.

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Not many in Colorado, according to the Colorado Springs Gazette, which reports that the Motor Trend Certified Advantage [yes, really] network is joining Sears in mopping up culled dealers. What GM’s pump-em-up video leaves out: the fine print explaining how the new-look dealership renovations will be paid for.

The Colorado House’s passage of HB-1049 [PDF here], a bill requiring restitution for dealers culled during the Chrysler and GM bankruptcies, has drawn a $60,000 “no” campaign from General Motors. The Denver Post reports that GM’s ad campaign, which features lines like “we must keep driving forward to repay our government loans,” and “don’t let special interests stick taxpayers in reverse,” has riled up local lawmakers more than ever, drawing such timeless put-downs as: “they must be spending tax dollars on Botox to say that with a straight face.” The bill would require OEMs compensate culled dealers for signs, parts, dealer upgrades and more, as well as offer them the right of first refusal for any new area dealerships.

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“The American people are willing to forgive and forget, but they would like a little gift,” AutoNation CEO Mike Jackson tells Toyota [via USAToday]. Toyota’s answer (other than possible warranty extensions): a nice, dull little facelift for a nice, dull little cute ute. Meanwhile, Toyota’s US dealers are not thrilled with the state of affairs, gifting Automotive News [sub] such saucy quotes as:

Dealers will be talking [at the NADA convention] about how this will affect their investments as a dealer. You bet I am questioning my investment. I think they have handled this poorly.

And that was the quote that didn’t feature expletives! Will the softroader update (shown here in European spec) tame the angry beast that is Toyota’s dealer network? Given that it’s only being shown in Europe until “later this year,” the answer seems to be “not for now.”

It’s not a question that should leave many folks on the fence, but apparently there are at least a few Detroit-area journalists who might be willing to consider the career change. “Dealers optimistic about Chrysler’s future” proclaims the Detroit News headline from NADA’s annual convention. A more accurate headline (such as USAToday‘s “Chrysler dealers face new-model drought”) probably should have included the term “punch-drunk” to better explain this unexpectedly sunny outlook. One grizzled ChryCo dealer sums up the mood with aplomb:

We’re the toughest fighters. We’ve always been 3 or 4 (in the marketplace). We’ve never been spoon-fed. We have to fight for every piece of ground… There’s light at the end of the tunnel; I just don’t like the length of the tunnel.

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Toyota’s PR efforts have been competent if muted during the ongoing recall scandal. Though it could certainly have done more in the past weeks (specifically by making top leadership more available to the public) Toyota has carefully avoided overreacting to the mushrooming media frenzy. Until now. The NYT’s Wheels Blog reports that the 173 Toyota dealers who make up Toyota Southeast have pulled regional ads from ABC stations because of “excessive stories on the Toyota issues.” Toyota Southeast’s ad agency 22Squared says “We have counseled the client on the pros and cons of this, and ultimately it was their decision to make.” Toyota continues to run corporate ads on ABC, but the petulant backlash from its Southeast dealers can’t help but reflect poorly on the brand. Any PR pro will tell you (and presumably 22Squared  counseled its clients of this), that these kinds of strong-arm tactics do nothing to improve public perceptions of a brand. Toyota dealers might feel that the parent company is not doing enough on the PR front, but this approach will only create the need for more PR in the future.

Inventory management woes have played a huge role in the decline of America’s domestic automakers, but according to a lengthy piece in Automotive News [sub], the days of inventory pushing are now officially a thing of the past. Unless they aren’t. At the moment things look good. AutoNation CEO Mike Jackson enthuses:

It’s the most exciting thing we’ve ever seen. I’ve lived for this day to come. The inventories for the industry are the cleanest and in the best shape ever — ever.

AN [sub] says inventory levels are at their most sane levels since they began tracking data in 1992. That gives Detroit executives the opportunity to crow over their discipline and the sustainability of their business models, despite the fact that the Detroit firms still top recent average incentive estimates. And long-term estimates show up to 2m units of overcapacity will be re-accumulated by 2012. “I hope [inventory push] is dead,” says Group 1 CEO Earl Hesterberg. “I doubt it’s completely dead just because of the fixed cost pressure on manufacturers.”

About half of all dealers culled in the GM and Chrysler bankruptcies have filed for congressionally-mandated arbitration, reports Automotive News [sub]. 409 of the 789 culled Chrysler dealers and over 1,000 of the 2,000 culled GM dealers have paid the $1,625 to file for arbitration, and will move into the next phase of the process: agreeing on an arbitrator. Having threatened to sabotage the process with a lawsuit on constitutional grounds, it’s a bit of a surprise to see Chrysler suddenly validating the arbitration process,but that’s what appears to be taking place. Chrysler tells AN [sub]:

The company looks forward to the expeditious completion of the process. A robust dealer network is a critical component of the group’s strategy of rebuilding a strong and resilient American automaker

Representatives of the culled dealers are optimistic that many could be reinstated when arbitration wraps up in June, but only if Chrysler continues to approach the arbitration process with an open mind. Whether that happens or not will be clear as the process goes on.

GM’s newly-permanent Chairman/CEO Ed Whitacre balked visibly when asked following his self-coronation if the dealer cull arbitration process would hurt GM’s chances of success this year. “I’m not sure it will weaken us,” was his half-hearted response. Whitacre’s hesitation was a bit of a surprise, considering that GM is taking a far more tolerant attitude to the arbitration process than Chrysler. But, as Automotive News [sub] reveals, GM’s downsizing was highly focused on its Cadillac brand, and if arbitration results in widespread reinstatement, Cadillac could find itself stuck with a number of small-town dealers it doesn’t want.

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