Politics

GM, Chrysler Say Slashing Dealerships Key to Survival

The chiefs of General Motors and Chrysler told skeptical lawmakers on Wednesday they have too many dealers to support their slimmed down operations and sacrifices must be shared as they fight to overcome bankruptcy and survive. They acknowledged that slashing dealerships is causing pain in communities around the country.

"This is our last chance to get it right," GM President Fritz Henderson told the Senate Commerce Committee. He said these were "tough times for everyone in the GM family."

Chrysler President James Press told the panel his company was "working hard to achieve a soft landing" for dealers. But if underperforming dealers aren't selling cars, the company can't return to profitability, he said.

Committee Chairman Jay Rockefeller, D-W.Va., suggested both companies were abandoning customers and dealers, some of whose families have been in the business for decades.

"I don't believe that companies should be allowed to take taxpayer funds for a bailout and then leave local dealers and their customers to fend for themselves with no real plan, no real notice and no real help," Rockefeller told the automakers. "That is just plain wrong."

Those dealers "are looking into a black hole right now," while companies seem to be implying "that the dealers themselves are responsible for the companies' problems," Rockefeller said.

More than 2,700 dealerships are in line to lose their franchise. Two small-town dealers invited to appear before the committee spoke of the anguish ahead.

Russell Whatley, a Chrysler-Dodge-Jeep dealer in Mineral Wells, Texas, said his grandfather opened the business in 1919. "A 90-year investment is just gone," he said. He called Chrysler's actions "wasteful and devastating."

Peter Lopez, a GM and Chrysler dealer in Spencer, W.Va., said he had met every financial obligation put forth by Chrysler and GM but still "they want to shut me down."

"I am the face of GM and Chrysler in my town," he said."It's unbelievable how we have been treated."

The executives of the struggling companies said there are too many dealers, with many representing the same company often competing with each other for sales. Auto officials claim many of the dealerships date to the 1940s and 1950s, when motorists lived farther apart and Detroit automakers led the world in sales.

After hemorrhaging customers for decades and losing market share to foreign competitors, the two automakers said their companies need to scale back all their operations to become leaner and to hopefully return to profitability.

Chrysler is expected to emerge from bankruptcy protection within the next few days. General Motors filed for Chapter 11 protection on Monday and its officials said they hope to be able to emerge as a new company in 60-90 days.

Lawmakers argued that the dealership closings will put thousands of people out of work and offer few savings to GM or Chrysler, which have received billions in federal aid as they attempt to restructure and return to profitability. The industry, in response, says taxpayers' investment is best protected by shedding unprofitable operations and strengthening the bottom line as fast as possible.

"It's not our place to change your decision," Sen. Kay Bailey Hutchison, R-Texas, told the auto executives. "But it is our place...to make sure that everyone is treated as well as can be in these circumstances."

Rockefeller, the chairman, asked Lopez, the West Virginia Chrysler and GM dealer, it he could shut down the Chrysler part of his dealership on such short notice. He could not, Lopez replied.

Then Rockefeller asked Press whether he could shut down a dealership in such a short time frame -- if the tables were reversed. The Chrysler executive began, "We're in the process of working through tough bankruptcy ..."

Rockefeller told him to answer the question. "I would have to find a way to do it," Press said.

Chrysler LLC has identified 789 dealerships it plans to close next week, about a quarter of the company's dealership network. Its plan has drawn fire from lawmakers because dealers received only three weeks' notice.

General Motors told 1,100 dealerships it does not plan to renew their franchise agreements in late 2010 and expects to shed an additional 900 dealerships through attrition and by selling or discontinuing its Hummer, Pontiac, Saab and Saturn brands.

Chrysler dealers have only until June 9 to close down. "That termination date is needed to ensure that our new dealership structure will be firmly in place at or about the time the new company is formed with Fiat, something understandably important to Fiat," Press said.

Chrysler says its departing dealerships have resold or redistributed about 90 percent of their inventory and parts through a company program. But dealers being let go want the Obama administration to give them more time.

"We have an eight-month supply of vehicles and only three weeks to clear them out," Whatley told the committee.

GM said the dealers it's not renewing are being given until October 2010 to close.

Meanwhile, a group of Republicans distressed by the Obama administration's temporary nationalization of GM is proposing that congressional approval be required before money from the Troubled Asset Relief Program is used to buy a stake in a company.

The lawmakers complained that Congress had no opportunity to review the Obama administration's decision to take a 60 percent ownership of GM.

"General Motors needed a real bankruptcy, not a political bankruptcy," said Sen. Jim DeMint, R-S.C.

"We end up owning 60 percent of the stock and not a single vote was cast on that plan," said Sen. Mike Johanns, R-Neb. Johanns said the amendment, which they hope to consider Thursday, would apply to any money provided after May 29.

The third Detroit automaker, Ford Motor Corp., has not filed for bankruptcy protection and has not taken any federal bailout money. It has also not announced widespread dealership closings.

Car dealers are a potent political force, contributing more than $9 million to federal candidates for the 2008 elections.