Thursday, June 4, 2009

Terminated Chrysler Dealers Are Heard; The Clinton Scent Redux

Today, Chrysler's terminated dealers finally get a chance to be heard by Judge Speedy, although the mootness of the hearing can be smelt from miles away. Associated Press has some good color on the proceedings:

Just under 20 dealers were sworn in at the beginning of what was expected to be a lengthy day of testimony from both dealers and Chrysler LLC executives. Arguments on the motion are scheduled for Tuesday.

It's not clear when U.S. Judge Arthur Gonzalez will rule on Chrysler's motion, or how this will effect Chrysler's plans to terminate the dealer franchises effective Tuesday.

James Tarbox broke down while testifying about learning that the franchises for his pair of dealerships in Rhode Island and Massachusetts were included on Chrysler's list of the 789 it plans to terminate.

"I thought there must be a mistake," he said choking back tears.

Though acknowledging that he posted a loss for 2008, Tarbox said his dealerships have won awards for both sales and service in recent years.

While dealer closure is a natural and expected phenomenon, as both Chrysler and GM attempt to streamline into something resembling profitability, the question of terminated dealer selection is one that has bothered Zero Hedge, and specifically Marla, who put together some very interesting statistical analyses and models trying to extract any relevant patterns. As readers will recall, while the data preliminarily did not demonstrate a republican or democratic bias, there was some peculiar tendency in the data to favor Clinton donors. Yes, just statistics, and we all know those can be flawed. Plus the data set Marla worked with was not exhaustive. Hopefully, when GM discloses its full list of closures, the statistical exercise can be repeated with a much bigger sample population which should confirm or deny any relevant observations. Several GM dealers have already approached us unsolicited with information on their termination: we hope that if GM is tight lipped about its dealer list, that more voluntary information will come from the GM dealer community. But again, the best possible outcome is to get a more relevant statistical case.


Last night I decided to flip through some of the sworn declarations presented by the dealers at the bankruptcy court hearing today. The compiled presentation list is presented below for the benefit of readers. The dominant theme among all dealers is that virtually all acknowledge they were compliant with both Project Alpha and Project Genesis: the key cut off criteria that Chrysler stated it had used in determining who gets terminated and who stays. In fact, the bulk of the dealers had significantly above average statistics from a sale, MSRP, customer satisfaction and service point of view within the entire Chrysler dealer universe. So in the event that retained dealers were not Genesis compliant while cut ones were, this would demonstrate that there was, in fact, more here than meets the eye. We leave the exercise for a later day, but will get to it shortly.

One particular declaration caught my eye, that of Ethel L. Cook, a dealer based in downtown Little Rock, a town near and dear to the former resident. I believe readers can draw their own conclusions based on Mr. Cook's sworn testimony (highlights mine).
On May 13, 2009, I received a letter from Chrysler notifying the Dealership that Chrysler had elected to “reject” our Dealer Agreement. I am obviously very familiar with the Little Rock, Arkansas dealer network and was surprised because both Cook and Crain, the only Chrysler dealers in Little Rock, were both rejected. Therefore, Chrysler’s action would, on its face, result in a complete lack of representation in a major American city. Since that would be a ludicrous result, one can only infer that Chrysler has a more sinister motive.

Because it is inconceivable that Chrysler will not have a dealership in Little Rock going forward, the only conclusion that one could draw is that, after review, the evidence in other markets in the region, that Chrysler now intends to “give” the Little Rock market to a Landers-related dealer.

Having reviewed the pattern of assumption and rejection of dealers throughout their region, I have detected a pattern: In every market where there is a dealership connected with former Penske Automotive executive Steve Landers, or his new automotive partnership with “Mac” McLarty (former Chief of Staff for President Clinton) and Robert L. Johnson (majority owner of the Charlotte Bobcats), the competitors are rejected.

In the Little Rock, Landers Chrysler Dodge Jeep is located far out of town in Benton, Arkansas. Nevertheless, the two Little Rock dealers, Cook and Crain were rejected.

In the Fayetteville, Arkansas area, Landers-McLarty Dodge Chrysler Jeep is located far out of town in Bentonville, Arkansas. Competitors Springdale Dodge Chrysler, Steve Smith County Jeep and Jones Brothers were all rejected.

In the Shreveport, Louisiana market, Lee’s Summit Dodge Chrysler Jeep (a Landers McLarty dealership) is located in Bossier City, Louisiana. Both competitive dealers, Claude de Beaux in Vivian, Louisiana and Greater Birmingham Dodge Chrysler in Shreveport were rejected.

In the Springfield, Missouri market, Tri-Lakes Motors (a Landers-McLarty dealership) is located in Branson, Missouri. Competitors Heritage Chrysler Jeep in Ozark, Missouri and Ramsay Motor Company in Harrison, Arkansas were rejected. A pattern seems to be emerging. Everywhere there is a Landers-McLarty dealership, Chrysler has rejected the competition.

In the Huntsville, Alabama market, Landers McLarty Dodge Chrysler Jeep, is located in Huntsville. Competitor Cloverleaf Chrysler Dodge Jeep was rejected.

Favoritism and cronyism towards preferred dealer group is not a valid exercise of business judgment.
We could not agree with the last line more, Ethel. After reading this sworn declaration, Zero Hedge is eagerly awaiting the full results from Marla's exercise, especially once it gets the much needed GM dealer termination data.

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