Chrysler says it won't sue over dealer arbitration

(AP) — Chrysler Group LLC said Thursday it won't sue to try to stop arbitration with hundreds of dealers it wants to close.

Chrysler shut down 789 dealers in June amid lagging sales. General Motors Corp. also told 2,000 dealers it plans to revoke their franchise agreements by October. But Congress objected and passed a law in December allowing GM and Chrysler dealers to appeal those decisions.

Chrysler said Thursday that 409 of its dealers have filed paperwork to appeal the closures. The American Arbitration Association, which is handling the appeals, said 1,573 dealers in all have filed to appeal, including dealers from GM.

Chrysler had been considering a federal lawsuit to try to stop the process, but said Thursday it will go forward with arbitration.

Sources familiar with Chrysler's case say the arbitration process could cost the company hundreds of millions of dollars. There also is a question of whether Congress's action went against the Treasury Department, which granted aid to Chrysler on condition that it pare its dealerships. The sources requested anonymity because they were discussing sensitive company issues.

The arbitration hearings are scheduled to begin in late February or early march and end by June 14.