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Auto dealership employment hurt more by recession than store closures

Posted: 5:27 p.m. July 19, 2010

Auto dealership employment hurt more by recession than store closures





Collapsing housing prices and the ensuing financial crisis eliminated more auto dealerships jobs than

Chrysler’s and General Motors’ closing of about 1,800 dealers, according to government employment data.


But savings automakers estimated they would realize from the dealership closings — $2.6 billion by GM and $36 million by Chrysler — will be far smaller due to legal costs of arbitration and GM’s decision to reinstate hundreds of

dealers it had targeted for closing, say lawyers who represented task force, released Sunday, criticized the decision to close so many dealerships, saying it overlooked how many jobs would be lost. Based on the government’s own data, however, most of those jobs had already disappeared.Auto dealers of all brands employed 1,186,000 in 2008, based on the U.S. Department of Labor’s Bureau of Labor Statistics. As of June 2010 that had dropped to 1,014,600, a decline of 14.5%. However, from June 2009, when the dealer closings were begun, dealer employment has actually risen by 1,500, the BLS data shows.Dodge dealers have won the opportunity to be reinstated through arbitration. Chrysler had offered reinstatement to about 50 terminated dealers before the arbitration process began.

“Those numbers were silly to begin with,” said Mike Charapp, an attorney who represented terminated dealers who pursued arbitration. “When you look at the $2-billion savings GM said it would save, those were all variable costs that were simply shifted to the surviving dealers.”

An audit of the Obama’s


The audit doesn’t provide relief to about 740 former Chrysler and about 1,100 former GM dealers who have either withdrawn, settled or lost arbitration cases.

“I would invite the Inspector General to come to Detroit and meet with those of us who lost our livelihood,” said Gina Russo, former general manager of now closed Lochmoor Chrysler-Jeep on Detroit’s east side.

About 29 terminated Chrysler, Jeep or

Chrysler has prevailed in 69 arbitrations and settled 150 others. More than 125 cases were dismissed or withdrawn, said company spokesman Mike Palese. The company has used the global law firm of Wilmer Hale, as well as regional and local law firms in arbitrations. Chrysler declined to disclose the cost of those legal services.

GM has offered reinstatement to 666 dealers it originally planned to terminate. GM spokeswoman Ryndee Carney declined to say how many of those will reopen.

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