One of the many closed Chrysler dealers, which initially planned to switch to selling Mahindra pickups.
A group of 64 former Chrysler dealers, terminated as part of the maker’s government-funded bailout, have sued the federal government for what they claim was the unjust taking of their businesses.
The White House auto czar originally approved plans to slash thousands of General Motors and Chrysler dealers once the two makers emerged from bankruptcy, though the figure was eventually reduced, in part, under a government-mandated arbitration process. But Chrysler’s retail total was ultimately reduced by 789, to about 2,400 today.
The 64 that have signed onto the new lawsuit claim the closures were an unconstitutional taking of their livelihoods for which they were not properly compensated. They’re seeking damages of at least $130 million.
While their lawyers acknowledge there could have been a “significant disruption” of the domestic auto industry without the multi-billion-dollar bailout of GM and Chrysler, they insist the cost to the dealers “must in fairness and justice by borne by the public as a whole.”
The power of the government to take private property is covered by the Constitution’s Fifth Amendment, which requires “just compensation,” though whether that applies in the case of dealers who might have otherwise lost their businesses in bankruptcy is likely to be debated if the case goes to court. It will be defended, on the government side, by the Justice Dept.’s civil division.
Chrysler is not a party to the lawsuit and does not stand to be financially impacted.
Following their emergence from bankruptcy – Chrysler in June 2009, GM a month later – the makers aimed to slim down their retail networks, pointing to their import competitors who have found it more profitable and effective to work with fewer dealers.
While GM initially planned to give its terminated retailers time to wind down their operations, Chrysler moved to immediately terminate the franchises of those on its cut list.
But the dealer cuts triggered a strong outcry from a group that has traditionally been a major force in local politics – and Congress eventually passed legislation permitting terminated dealers to arbitrate their claims. In part due to a review of its policy, but also because of the arbitration process, 80 Chrysler franchises were restored. GM, meanwhile, reinstated 660.