GM and Chrysler CEOs called to D.C. to explain dealer closings
The situations with GM and Chrysler are beginning to look like what happens after a fumble in an NFL game: a dozen men pile on top of each other all trying to get the ball. The difference in the case of GM and Chrysler is there are far more than two teams struggling for the prize. The latest to hop on and shove a hand in is the Senate Commerce Committee, which wants the CEOs to testify "early next month" regarding the planned dealership closings.
Chrysler's sent 789 dealers eviction notices, GM is out to dispatch 1,124 dealers in the US and about 245 in Canada. The GM dealers won't have their franchises renewed as of October 2010, and are said to be staying in operation until they sell the last of their inventory. Chrysler dealers are expected to board up the windows by June 9, although Jim Press recently gave assurances that there will still be help given to those dealers after that date. The Commerce Committee isn't moved by either proposal, citing what it calls "the short and insufficient transition period given to dealerships for franchise terminations."
The hearings would be chaired by Senators John Rockefeller and Kay Bailey Hutchison, and will address what happens to dealer inventory and jobs and consumer needs like warranties and servicing. Hutchison was working on legislation to force automakers to give dealers 60 days notice before closing their franchises (which GM has done) or else go without government help. That legislation was put on hold after Press' letter, but now Nardelli and Henderson will need to go explain things to the principal in person.
For GM it's just one more thing to lump into the impending bankruptcy in-box. For Chrysler, every additional delay in sorting out its business situation only gives Fiat more of those pre-wedding jitters.
[Source: Automotive News - Sub. Req.]
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Reader Comments (Page 1 of 2)
Brent 8:36AM (5/26/2009)
That bubble isn't something Bob would say or think.
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Todd 8:42AM (5/26/2009)
Huge conflict of interest for Senator Hutchison, based on her campaign contributions buy Exxon and Detroit lobbyists:
http://www.opensecrets.org/politicians/industries.php?cycle=2010&cid=N00005675&type=I
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jpm100 1:00PM (5/26/2009)
The majority of "automotive" comes from dealerships. So yes your are correct, but its not likely the manufacturers she's beholding to.
The Other Bob 8:43AM (5/26/2009)
Let's see. Franchise laws have created a artificial situation where there are too many dealers that auto companies cannot shed. They are taking this as an opportunity to get them to the correct level.
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Sea Urchin 9:07AM (5/26/2009)
Good point BUT the laws did not create all those franchises, people gave money to Chrysler, which Chrysler gladly took and allowed them to sell Chrysler cars.
Jei 10:49AM (5/26/2009)
Since when was it illegal to NOT renew a contract. Govt organizations do it every year with their contract labor employees. An easy way to adjust the necessary workforce based on demand for certain skills or services required.
Many of the Chrys & GM franchises were opened by owners "knowing" that they'd be competing with other established locales in their area (or just up the street from them). None of them ever thought that the economy would ever get this bad; making it painfully obvious that weaker franchises must be eliminated.
For example, Starbucks was having serious profit issues....it wasn't making any. They decided to close many of their overlapping franchise locations. And if you've been to downtown LA, DC, NYC, Atlanta, etc; they were on just about every corner in little cute walk-in shops. If your favorite location was packed, just go 1 block over to be served in seconds. Starbucks closed a lot of those franchises as an easy way to cut costs and re-focus on quality.
When large service or product oriented companies need to cut costs, they look at where their largest profits are coming from (what location, who, time of day, etc). They cut under performing sites and see how they can make their mid-level locations better.
NOTE: GM & Chrysler wasn't looking at what dealer sponsored the local high school football team for 20 years. Or who provided vehicles for annual parades. Those were local decisions made at the franchise level and doesn't involve the manufacturer.
Sea Urchin 11:20AM (5/26/2009)
@ Jei, Starbucks has no franchises, all Starbucks stores are owned by the company, dealers are independent, they are in no way owned by Chrysler.
Mike 8:51AM (5/26/2009)
I thought the dealer closings was part of the two automakers bailout loan terms.
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John 8:56AM (5/26/2009)
Exactly, Obama created this situation. Let the dealers sue the government because the manufacturers are the ones given the ultimatum to close up dealers.
Kumar 9:28AM (5/26/2009)
If, by 'creating this situation', you mean that the 'O kept Chryser (and soon GM) from closing completely and liquidating, leaving no dealerships open, then yes, yes he did.
Yeah, this situation sucks for the dealers that have closed, but I've been reading for the last decade about attempts to trim the dealer ranks in the big 3, so their move comes as no real surprise.
John 11:26AM (5/26/2009)
"If, by 'creating this situation', you mean that the 'O kept Chryser (and soon GM) from closing completely and liquidating,"
There is no proof they would have to "liquidate". I think you are over dramatizing. They would be in the same situation, Ch 13, with or without the government money. That's why they were stupid to let Obama gain control of the company. GM and Chrysler made a deal with the devil, now they have to live with it.
Brad 8:57AM (5/26/2009)
I just don't understand how Chrysler especially can stick those dealers with the vehicle inventory and the parts inventory. It's totally useless to have vehicles sitting there with no incentive or warranty support. What are the dealers going to do with them if other dealers don't end up taking them? I could understand sticking them with the used inventory but not the new.
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The Other Bob 9:17AM (5/26/2009)
"I just don't understand how Chrysler especially can stick those dealers with the vehicle inventory and the parts inventory."
Its called bankruptcy. Why do people think everything would come out rosey for everyone during a Chapter 11?
Sea Urchin 9:26AM (5/26/2009)
Brad, have you ever had a really bad costumer experience? A really, really bad one, where you got screwed? If you did i bet you have never gone back to that store or to that company ever again.
Same will be here, some consumers and former dealer will never again do anything with Chrysler in any capacity. This is why we have a % of population that outright refuses to buy domestic products, i can guaranty you will get a lot more former Pontiac, Saturn, Chrysler, Dodge buyers dealers who will never again buy from D3.
Rob 8:59AM (5/26/2009)
Welcome to the world of government run industry.
For a forecast of what will happen to the US auto business, see: British Leyland.
BritRob
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Yikes 9:05AM (5/26/2009)
Yes, Obama does not like the dealerships choosen, so Obama will be calling them back to DC and informing them which dealership will or will not be closed. All part of Obama's redistribution of wealth plan.
Alex 9:06AM (5/26/2009)
It's okay, the delay will cost GM and Chrysler billions but our Government has lots of expendable income sitting around to throw at them.
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Len_A 9:17AM (5/26/2009)
The delay may never happen, because the bankruptcy court doesn't answer to the administration or Congress. Chrysler's is pretty much a done deal so far, but this could create a small delay in GM's dealer closures because they haven't filed for bankruptcy protection yet.
The ramifications to the local communities, and even the states, with dealer closures is huge, but the Senate especially si a day late and dollar short on this. They should have heeded the warnings last November when GM & Chrysler went to DC.
Blacknimbus 9:14AM (5/26/2009)
This will all end in tears...
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Venom 4:16PM (5/31/2009)
You have to love the idiots that come on here and try to blame Obama for everything just because they are either racist or stupid or both.
You guys complain about the money being given to the auto companies to keep Americans in jobs but not about the trillion plus dollars spent on a bogus war against a country that never attacked or threatened us and if the Republicans were in we would be spending another trillion on Iran right now.
We have spent over a trillion dollars on a war based on a few guys flying planes into a few buildings with overall damage over just a couple of billion dollars and a few thousand lives. The number of dead soldiers now outnumbers the people dead in 9/11.
And to cap it off, we have none of the top guys that actually caused this incident.
By the way we just approved another $91 billion last week for war funding, I don't see you guys complaining about that.
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