Dealers testify in Chrysler bankruptcy

NEW YORK - A parade of Chrysler dealers set to lose their franchises took the stand in court yesterday in the automaker's bankruptcy-protection case, one choking back tears, as they touted their sales and service records and questioned how they were chosen for termination.

About 14 dealers testified at the hearing, but no Chrysler L.L.C. officials took the stand. Legal arguments on the matter are scheduled for Tuesday.

It was unclear when U.S. Judge Arthur Gonzalez would rule on Chrysler's motion to cancel the dealerships' franchise agreements, effective Tuesday. The cuts include 11 Chrysler, Dodge, or Jeep dealerships in the Philadelphia area.

Separately yesterday, the U.S. Court of Appeals for the Second Circuit in New York scheduled a hearing for this afternoon on the proposed sale of Chrysler to a group led by Italian automaker Fiat S.p.A.

Gonzalez ruled last weekend that the sale could take place as of noon today. But the deal has been stayed pending an appeal filed by three Indiana state pension and construction funds.

The funds argued that the deal unfairly favors Chrysler's unsecured stakeholders ahead of those of secured creditors such as themselves.

In court briefs filed yesterday, Chrysler and other supporters of the sale said it was fair, had the backing of a majority of Chrysler's creditors, and should proceed quickly.

At yesterday's dealership hearing, James Tarbox broke down as he recalled learning in May that the franchises for his pair of dealerships in Rhode Island and Massachusetts were included on Chrysler's list of the 789 it plans to terminate.

"I thought there must be a mistake," he testified, choking back tears.

Though acknowledging that he posted a loss for 2008, Tarbox said his dealerships had won awards for both sales and service in recent years.

The Auburn Hills, Mich., automaker says it needs to reduce its dealer base by about 25 percent to a leaner network of about 2,400 dealers to emerge from Chapter 11 bankruptcy protection as a stronger company.

But the dealers argue that they do not cost the automaker anything. They say that if Gonzalez approves Chrysler's motion, thousands of workers will lose their jobs.

A group representing about 300 of the dealers has filed an objection to the plan. The same group earlier opposed Chrysler's sale to Fiat, saying it was tied to the plan to eliminate the dealerships.

Alan Spitzer of Medina, Ohio, an auto dealer since 1970, said he spent $3.5 million in 2003 on a new building to combine two of his Ohio Dodge dealerships under one roof.

But all of Spitzer's Chrysler franchises, including others in Ohio and one in Florida, were on Chrysler's hit list. Spitzer also owns dealerships that sell a variety of other brands.

Before the day's testimony began, Gonzalez said the automaker had a good case to terminate the dealer franchises.