DETROIT (AP) — Chrysler Group LLC has settled a lawsuit against North Carolina over a state law that aimed to block the company’s effort to cut dealers, and it will continue its cases in Oregon, Illinois and Maine over similar laws.
The automaker said in a statement issued Monday that the U.S. Bankruptcy Court in New York approved the settlement on Thursday.
Chrysler said North Carolina agreed not to enforce a law passed in August.
The company rejected 13 dealers in North Carolina. The settlement means the dealers’ only remaining hope is arbitration.
The state law, similar to legislation recently adopted in Oregon, Maine and Illinois, gave dealers cut by Chrysler the right to challenge or stop the company from awarding new franchises nearby unless Chrysler paid the dealers for the value of their franchises or showed the state the cut dealers were unfit.
Chrysler says it will pursue its lawsuit against the three other states, leaving the fate of 56 rejected dealerships there in doubt.
Chrysler contends in a lawsuit filed last year with the bankruptcy court that a bankruptcy court order approving plans to shed 789 dealerships trumps the state laws. The lawsuit asks a bankruptcy judge to strike down the state laws.
The settlement comes as about 330 of the fired dealers begin to challenge their dismissal in arbitration hearings required under federal law. A total of 418 sought arbitration, and Chrysler already has agreed to reinstate 86 of them.
Hundreds of fired General Motors dealers also are going through arbitration.
Chrysler says the reinstatements of the Chrysler, Dodge and Jeep brand dealers are in areas where the dealers can offer service to customers without hurting its remaining 2,334 dealers.
Congress passed a law in December requiring an appeals process for General Motors Co. and Chrysler dealers whose franchises were revoked by the companies. Chrysler had considered challenging the federal law but eventually decided not to.
Now the company appears to be taking a harder line against the remaining dealers it has terminated.
In its statement Monday, the automaker said shedding the dealers was a necessary part of making the company viable in bankruptcy court, and it was part of the deal for the U.S. government to provide financing and for Italy’s Fiat Group SpA to take over management of the Auburn Hills, Mich.-based company.
The company said it used dealership performance data and market factors to decide which dealers would get the ax.
“The only alternative would have been complete liquidation of the company, which would have resulted in all 3,200 dealers closing, hundreds of thousands of lost jobs, and defaults on billions of dollars in taxpayer loans,” the statement said.
Chrysler has received about $15.5 billion in loans from the U.S. government as Fiat CEO Sergio Marchionne tries to rescue the troubled automaker.
Fiat’s and Chrysler’s reports on their first-quarter earnings, due Wednesday, will offer the first glimpse into Chrysler’s financial performance since it emerged from bankruptcy protection in June.