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Chrysler and GM Offer Settlements to Terminated Dealerships

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On: Fri, Aug 13, 2010 at 4:07PM | By: Sherry Christiansen

Chrysler and GM Offer Settlements to Terminated Dealerships

Chrysler Corporation has settled with the terminated dealerships after arbitration cases were resolved.  The company was said to have cut expenses by offering less than $100,000 to the dealerships that had filed claims in an attempt to stay opened after Chrysler attempted to force close thousands of dealerships across the country.

Chrysler spokesman, Michael Palese, in an attempt to set the record straight emailed a statement to the press reporting that average settlements were actually around $500,000.  According to Automotive News.com, in the email Palese cited; “people with direct knowledge of the terms.”  Palese reiterated that Chrysler settled 151 out of 418 arbitration cases that had been filed by dealerships that were closed as a direct result of the company’s bankruptcy last year.  Palese stated that many of the settlements involved cash payments.

“It makes good business sense anytime we can settle a case for an amount significantly below the cost of litigation,” he said in his email. “This enables Chrysler to focus more resources into what’s truly important -- developing outstanding products.”


The only specific numbers that Palese quoted were the overall settlement figure of “significantly below $15 million.”
But Lawyers that represented the dealers had a different take on the scenario, reporting that in April offers were being made for only $25,000, and although the numbers increased as arbitration claims continued into July, attorneys claim that they never came close to what General Motors offered its dealers.

A General Motors spokesperson would not disclose the average settlement or the total payments that dealers received when they were forced to close the doors.

According to an attorney who represented both Chrysler and General Motors; “GM was willing to settle for an amount more closely aligned with the value of the franchise being taken from the dealer. “Although both sets of dealers are approaching the relationship cautiously, our Chrysler dealers are much more wary of expending capital on their franchises as compared to our GM dealers.”

General Motors’ attorneys stated that GM offered as much as $1 million in “wind down money” in order for the dealerships to close by October, indicating that some GM dealerships received up to $2 million in total settlement payments.

Although General Motors refused to report exactly how much was paid out to dealerships in resolution payments, of the 1,176 arbitrating dealerships, 408 were reported to have reached resolution. Most of the dealers who settled agreed to the store winding down in October as originally planned by General Motors in its post bankruptcy exit strategy.


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