Court asked to consider social and economic impact of closures
18 May 2009

Chrysler’s axed US dealers have asked the bankruptcy court to consider the widespread economic and social impact of their closure, and to consider the protection they should have been afforded under state franchise laws.

Last week the court ruled that Chrysler could axe 789 dealers - around a quarter of of its total number - as part of its Chapter 11 restructuring.

However, the rejected dealerships are now appealing to the court to reconsider its approval for the cuts, saying they are illegal and will have a widespread impact on the communities affected.

Chrysler has responded by asking the court to rule that the US bankruptcy code takes precedence over the state laws.

The axed dealerships had threatened taking legal action, but have backed off from that while the bankruptcy court considers their appeal.

Meanwhile, General Motors has also served notice that it plans to axe 1100 underperforming dealers, or about one-fifth of its total. However, unlike Chrysler, GM will remove their franchises only when existing contracts expire, in most cases late next year.

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