Guatemala Court Rules Against Chrysler Corp.
Decision in long-standing suit to block sales may hinder future plans by the Big Three US automakers to expand in Latin America
RULING on a multimillion- dollar lawsuit, a Guatemalan judge has ordered the Chrysler Corporation to stop selling cars in the Central American nation and has frozen the bank accounts of Chrysler dealers in Guatemala until the corporation pays off the suit.
The financial sting from the lost sales in this tiny market is likely to be minor. But the negative publicity could hurt Chrysler just as it is moving to expand sales in Latin America, auto industry analysts say.
``In terms of the money involved and market potential, this is not a big deal,'' says David Cole, director of the Office for the Study of Automotive Transportation at the University of Michigan. ``But in light of the NAFTA [North American Free Trade Agreement], it could be symbolically significant. The Big Three [United States automakers] have big plans for Mexico and Latin America. Depending on how this is played, similar situations could explode elsewhere.''
There are two Chrysler dealers and one Chrysler repair shop in Guatemala. Sales are relatively minimal. ``Clearly, if this is true, this is not going to impact us financially. We're looking at under 50 units sold per year [in Guatemala],'' says Chrysler spokesman Tony Cervone. Last year, Chrysler earned $2.4 billion on sales of $43.6 billion worldwide.
But, Mr. Cervone adds, ``It doesn't mean we aren't taking this case seriously.''
Claims in the case
The suit alleges that 26 years ago, the Kaiser-Jeep Corporation illegally took over the biggest Jeep dealership in Central America, Agencia Nicol, owned by Henry Joaquin Nicol. It then proceeded to run it into the ground, alleges the Nicol family.
The trouble began five years before the takeover.
Mr. Nicol was selling Jeep Wagoneers made by Kaiser in Brazil. The model was powered by a defective engine. Clients, including the Guatemalan government, began to complain and return the Wagoneers in droves. ``We sold hundreds. And they kept coming back. Water would mix with the oil [in the engine]. The car would just stop halfway down the road,'' recalls Mrs. Nicol in a telephone interview from her home in California. ``We sold more cars than anyone in Guatemala. But when this happened, the company turned its back on us.''
Kaiser refused to take back the cars, according to court documents. So Nicol tried to fix them. At one point, he was operating a repair shop employing more than 100 mechanics, according to relatives. Finally, as his dealership of 20 years neared bankruptcy, Kaiser and the National Mortgage Bank of Guatemala (a government institution) stepped in.
In 1968, to avoid bankruptcy, Nicol signed all of his property -
the dealership, several farms, a mine, a gas station, and other assets - over to Kaiser and the bank. The bank-appointed administrator was to pay off the debts and return to Nicol his businesses within five years, according to the agreement. Five years stretched to 23 years. After seven years, Henry Nicol died at age 80 - destitute. The autopsy report says he died of chronic malnutrition.
``My mother would find bread crumbs in his pockets. She later realized that he wasn't eating at dinner but hiding the bread so there would be more for us children at breakfast,'' says Vida Nicol de Paz, a daughter.
After years of legal battles, the Nicol family got back the dealership in 1991. It was deeper in debt than ever. Auditors were unable to find ledgers for much of the period it was out of Nicol's hands. And during that time, Kaiser was bought by the American Motors Corporation in 1970. In 1987, Chrysler bought American Motors. Chrysler officials concede that Chrysler is responsible for the liabilities of American Motors.
Suing for damages
Nicol's children are suing both Chrysler and the Bank for 20.8 million quetzales (about US$3.6 million) in lost income and plan to seek several times that amount in damages.
When contacted by telephone on Tuesday in Guatemala City, Chrysler's lawyers seemed unaware of the judge's ruling last week. Besides the embargo on sales, the civil court judge declared Chrysler ``rebellious,'' or in US legal terms, ``in default.'' This means that Chrysler will not be able to speak or present any evidence during further legal proceedings. The judge will decide the case based solely on the evidence given by the Nicol family lawyers.
The default ruling resulted from a court appearance in January when Chrysler's legal representatives arrived without sufficient authority, under Guatemalan law, to act on behalf of the corporation.
Chrysler spokesman Cervone says the corporation doesn't comment on litigation in process, but allows there will likely be an appeal.
``With the embargo, Chrysler may start to pay more attention to this case,'' says Manuel Alfredo Marroquin Pineda, an attorney for the Nicol family. The National Mortgage Bank of Guatemala isn't mentioned in the judges ruling. Mr. Marroquin says an out-of-court settlement is being discussed with the bank.
Further legal proceedings could drag on for another year in Guatemala. Meanwhile, the sales embargo will continue. If the suit is appealed by Chrysler, it could be another year before a judgment is rendered. If the Nicols win in Guatemala, they are considering suing Chrysler in the US court system.