California Investigates Chrysler-Owned L.A. Dealership

May 27, 2011

California's auto franchise law is fairly specific: automakers cannot own dealerships located within 10 miles of their franchised dealers. As with any rule, there are exceptions, and the law allows for ownership of under one year (in case a manufacturer buys out a failing dealership), or ownership in conjunction with franchised dealers who have a substantial investment in the operation.

That’s not the case with Motor Village L.A., a Chrysler-owned, 189,000-square-foot megastore located in downtown Los Angeles. And so, the California New Car Dealer’s Association has asked the California Department of Motor Vehicles to intervene.

Chrysler, who uses the store as a test bed for new retail strategies, alleges that they’re the victim of economic circumstances. The automaker acquired the retail operation in 2008, buying it from a franchise owner who had fallen ill. Back then, the store was known as La Brea Avenue Motors, and Chrysler sank substantial money into updating the operation. The name was changed to Motor Village L.A. in late 2010, and the store was moved to its current location in January of 2011. In between, the new-car market all but collapsed, making sales of such a dealership virtually impossible.  Chrysler confirms that they’ve made numerous attempts to sell the business, all without success.

The state dealer’s association isn’t buying Chrysler’s story, and their president, Peter King, told Automotive News, “From our perspective, there’s been a clear violation. We obviously don’t want the department (of Motor Vehicles) to close them down because that would adversely affect our 103 Chrysler dealers, but we can’t have rogue manufacturers not following the law and intentionally trying to circumvent it through sham devices to meet whatever the flavor-of-the-month new marketing strategy is.”

In a market like Los Angeles, where 85 percent of cars sold are imports, a high exposure dealership should prove beneficial to Chrysler (and Fiat) sales. Franchise dealerships may be losing unit sales to the store, but they’re gaining the benefit of market exposure that they otherwise wouldn’t have. It’s now up to the California DMV to determine who’s right and who’s wrong.

[Automotive News]

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