Bankruptcy Court Rules in Chrysler Dispute with North Carolina
AUBURN HILLS, Mich. — A U.S. Bankruptcy Court in New York has settled a dispute between Chrysler Group and the state of North Carolina over dealers seeking reinstatement.
The automaker revealed in a statement on Monday that the court brokered an agreement that indicates the state will not enforce its rejected dealer laws, measures that were passed last August.
The North Carolina law — similar to legislation recently adopted in Oregon, Maine and Illinois — gave dealers cut by Chrysler the right to challenge or stop the OEM from awarding new franchise locations nearby unless Chrysler paid the dealers for the value of their franchises or showed the state the cut dealers were unfit.
"Chrysler Group is pleased to reach an amicable resolution to our issues with the state of North Carolina," company executives noted in a statement.
"Such state dealer laws grant rejected dealers specific statutory rights previously afforded only to existing dealers, and are preempted in accordance with the bankruptcy court's prior rulings," they continued.
The automaker reiterated that the actions to reduce the dealer network were a necessary part of Chrysler Group's viability and central to the interim financing and partnership with Fiat.
Executives went on to recount that the process to determine which dealership contracts were rejected evaluated dealership performance and market factors using data driven criteria that was applied to every dealer.
They stressed that the only alternative would have been complete liquidation of the company, "which would have resulted in all 3,200 dealers closing, hundreds of thousands of lost jobs and defaults on billions of dollars in taxpayer loans."
Basically, Chrysler contends that the bankruptcy court order approving plans to shed 789 dealerships trumps state laws.
This latest development arrived as about 330 dealers begin to challenge their dismissal in arbitration hearings required under federal law.
A total of 418 sought arbitration, but Chrysler already chose to reinstate 86.
"There is no denying that Chrysler Group's and the public's economic interests are inextricably linked," the company emphasized in its statement on Monday.
"Chrysler Group not only employed sound business judgment in restructuring its dealer network, but is acting in the greater public interest by protecting the dealer network that was created during bankruptcy," the automaker added.
Reportedly, Chrysler has received about $15.5 billion in loans from the federal government.
"Chrysler Group is confident the difficult decisions made during bankruptcy will continue to position the company for sustainable success and will enable the company to repay the U.S. taxpayers in a timely manner," company executives said.