Business Law Notes
Special to Our Automobile Friends
Summer 2007 Edition
Chrysler is believed to have recently sent out a number of pre-termination letters to what Chrysler believes to be its lower performing dealers. Some of our North Carolina dealer clients have received this letter. These letters reference the North Carolina dealer termination statute, N.C. Gen. Stat §20-30S(6), and give dealers 180 days to improve their sales. In the event that these performance goals set by Chrysler have not been met within the 180 days, the letter threatens to take action against these dealers.
Although these letters are not themselves termination letters, they do satisfy the N.C. Gen. Stat. §20-30S(6)(a) 180 day right-to-cure requirement. As a result, dealers in receipt of these letters MUST respond promptly, incorporating information based on that dealer’s unique circumstances, including history, market situation, demographics, and product availability. The following list is a non-exhaustive summary of topics that should be covered in a dealer’s response letter:
- All inaccuracies or half truths contained in the factory’s letter need to be addressed, including, if applicable, the unfairness of the figure that Chrysler has selected for the dealer’s Minimum Sales Responsibility (MSR).
- Document all reasons for the dealer’s inability to sell more cars, especially those outside of the dealer’s control.
- Document all actions taken and investments made by the dealer to improve sales, including recent investments made in facilities, changes in staff, and changes in marketing designed to boost sales.
- Document past difficulties with the factory. For instance, less personal service from Chrysler, lack of availability of a dealer’s most marketable product, lack of advertising support from the factory, etc.
- Express the dealer’s strong interest in improving sales and give a specific, detailed plan for improving the dealership’s sales performance in the future.
At the conclusion of the 180 cure period, dealer performance will be measured again by Chrysler and those dealers whose sales performance has not met the factory’s goals (especially those who have made little or no improvement) may be the target of a termination letter. At that time, a dealer will need to file a formal protest petition before the N.C. Commissioner of Motor Vehicles within the appropriate statutory period of time in order to preserve his rights under North Carolina law to protest the termination.
The moral of this story is that every performance letter received from the factory requires a prompt, well thought out response. All recent correspondence between the factory and dealer will come into evidence at any termination proceeding before the Commissioner, so dealers need to make sure that the correspondence file that the DMV hearing officer will review at the termination hearing includes numerous letters from the dealer documenting the issues addressed above and showing the dealer’s concern about the situation.
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