• Jul 17th 2009 at 4:00PM
  • 44
One of the more controversial parts of the Chrysler bankruptcy was the decision to cut 789 dealerships by June 9. The move made for a quick, painful end to dealerships that in some cases spanned several generations of family ownership. When General Motors entered bankruptcy, it said it would cut about 1,300 retail stores, but the automaker planned on waiting until October, 2010 to pull the plug.

The dealership closings hit small and medium-sized towns particularly hard, putting pressure on lawmakers to do something to rectify the problem. The U.S. House took initial steps towards restoring the doomed dealerships by passing a bill to restore dealer rights. The bill, which has just been approved by the House by a 219-208 margin, would restore dealerships back to their previous state, forcing automakers to work through state courts to close down the stores. Since dealerships are such a big part of the employment picture in most states, GM and Chrysler face an expensive uphill battle to close the stores if the bill is also passed by Congress and then signed into law by President Obama.

Automotive News is reporting that Chrysler says the bill would cost the company $2 billion per year over the next four years. Vice President Peder Grady added on the Chrysler blog that if the bill were passed, " it flies in the face of a U.S. vehicle market that has declined 40 percent since 2007." AN also says that GM estimates the bill would cost them $2.5 billion in support, training and IT costs over a period of time.

The Obama administration is reportedly against the measure, saying that the dealership closings were "a critical part of their overall restructuring to achieve long-term viability." Thus, even if the measure passes muster in the Senate, there's a good chance it will face a veto from President Obama.

[Source: Automotive News - subs req'd | Image: Spencer Platt/Getty]

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    • 1 Second Ago
      • 6 Years Ago
      I support President Obama if he veto this Bill ! it is stupid and it
      is pointless. These dealers have a huge used car market to sell from.
      If that is not good enough then tough ! Sorry but if we force GM and
      Chrysler to continue their support to these dealers then we can
      pretty sure expect that we the tax payers will never get repaid from
      gm and Chrysler because then everything that has came to this point
      to get gm and Chrysler back on their feet's surely will force these
      two to go out of business and then the shock wave will make the
      unemployed of these dealerships pale in comparison ! this is sad but
      it is a must but cold evil to keep GM and Chrysler alive which
      employs far more in it ranks and it's suppliers ranks then these
      dealership did employ . If this bill would get passed then more then
      likely the end will be. These dealers should do the American thing and
      never quit but change course. There are other automakers out there who
      may pick a few up. you have Hyundai, KIA , Mazda , Suzuki that are
      with far fewer dealerships and Hyundai, KIA are two prime automakers
      who are on the Verge of being huger or the same as GM Toyota or ford.
      • 6 Years Ago
      If the Government thinks it's a good idea to have more dealerships, let them pass a law that Toyota needs more dealerships also !!!!!!!!!!!
      • 6 Years Ago
      If you have not notice that the current administration is pro Union, then you know that this bill will never get signed into law...Wasn't this administration who said in the first place to close down those dealers as appose to getting rid of the Unions..
      • 6 Years Ago

      More proof that we must demand that candidates for Congress achieve a minimum IQ score of 85 to run for office.
        • 6 Years Ago
        85? That would mean Biden's got to find a new gig. Maybe McGraw-Hill can give him a job. He seems to specialize in fiction.
      • 6 Years Ago
      My problem with this is that auto sales and auto service aren't being separated. It's very convenient for to have several Honda dealers in my metro area. I can drop my car off on my way to work and pick it up on the way home or go to a different dealer on a weekend near my home and wait for the car. Do both of these locations really need full sales teams?

      Really, why do we need dealerships and franchises at all? I've seen the valued added reseller equation help or hinder the consumer. In this situation I just don't see the value add of a dealer. In my personal experience I've spent more time on the phone complaining to the manufacturer about the heavy handed tactics of a dealer than getting the local dealer to help me fight "the man" at manufacturer.

      So why do we need dealers? And I refuse to accept answers of the sort, "because it creates jobs." Somebody convince me here...
        • 6 Years Ago
        What planet would you wish to reside? Why are their dealers? Jesus, you leave me shaking my head. I don't have an answer for such a dumb question. Whis is the sky have to be blue, why does water need to be wet, duh, duh, duh. Hey Pinoccio, waste your time pondering something that makes sense and get off the pipe.
      • 6 Years Ago
      I don't know why GM and Chrysler are worried about what it will cost them. We'll be footing the bill with no chance of ever getting paid back.
      • 6 Years Ago
      This is a non-issue as Obama will veto anyway. Those dealers are closed. In a few years GM & Chrysler will be gone as well. This is a smart way to slowly dissolve the two companies with minimal effect on the economy. VW, Kia, Toyota are building new plants here in US in the next 2 years. Two horrific automakers that build total junk (aka Camaro with transmissions falling out ALREADY, etc.) will finally be gone. Ford is the #1 U.S. automaker. Toyota and VW the largest globally.
        • 6 Years Ago
        I'll take any Toyota over Govt Motors UAW built garbage every day of the week. Pretty soon GM will be gone anyway. If hourly want to stay employed you might want to consider VW.com/careers - about 100 openings at the new Chattanoga plant.
        • 6 Years Ago
        The trouble Robert, is now Toyota is able to fill the junk (2007 Tundra with quality problems and 2007-up Camry V6-auto trans problems and the new Honda Insight received an harsh critic from Jeremy Clarkson and Consumer Reports) do they hired former beancounters from GM and Chrysler or what?

        And who know with overcapacity if Toyota and VW could close these plants as well?
      • 6 Years Ago
      This bill is but a symptom of that terminal Washington disease known as Potomac fever. Ridiculous.

      It'll die in the Senate, hopefully, but even if it makes it through, I hope President Obama vetoes it and then sets the paper on fire.
      • 6 Years Ago
      Many of the dealers that were cut were profitable. It was the government's auto task force that oversaw the cutting of dealers. Our current administration and said task force are full of people who have never run a business, never had to meet a payroll, been responsible for maintaining an inventory, etc- and it shows in the way they are running the private sector into the ground while expanding government. A government can't survive without revenue generated by the private sector, yet these people are too stupid to figure that out.
      • 6 Years Ago
      What is lost in alot of this is, most of these small town dealers only sold 10-20 cars a MONTH. All there money was made in used cars, that is why a majority of them have not fought. The money has always been in used. You basically make nothing on new cars. I can see the reginal sales rep walking in to the newly reissued/formally closed dealer with there monthly allocation. Um this month you'll get, lets see, 2 no make that 3 cars. GM and Chrysler would make there lifes so miserably.
      • 6 Years Ago
      This is an awful bill. There is nothing pretty about having to cut the dealership network down to a manageable size, but it is a move that is absolutely necessary. I am glad that the Obama administration is opposed to the bill.
        • 6 Years Ago
        Totally agree (with Obama no less!). It's ridiculous to tell these companies to go into bankruptcy and restructure and THEN force them to undo everything they did when they come out of bankruptcy. How is this a good idea?? I understand the desire to save jobs but the whole point of restructuring was to shrink the companies down to be more in line with the changes in demand. Having more dealerships than you need was something that HAD to change.
        • 6 Years Ago
        Aren't these fools the same ones that wanted these companies to fail back in December instead of giving them loans? This Bill is a good way to make sure we never get back the money we loaned these compnaines. In a few years we'll have no GM, no Chrysler and none of their dealers along with $50+ billion just vanashing in thin air.
      • 6 Years Ago
      If the rural areas turn out to be underserved, the automakers will put dealerships back in those communities. but lets face it, odds are slim.

      I don't know how this stupid bill addresses the franchises the new new new Chrysler has given out since closing others. Here in Toledo the sole remaining standalone Dodge dealer was given Chrysler and Jeep after the standalone Jeep dealer had his franchise pulled. The Jeep dealer wasn't 5 Star, and shared facilities with other brands they had in the same building. Chrysler had said they wanted 3 full line dealers here in the market when announcing Project Genesis. Now they have it.

      The Chrysler/Jeep dealer in Taylor MI (DO NOT BUY FROM THEM), was awarded a Dodge franchise after the dealer next door was closed. How do you force Chrysler to rsecind the agreement with the new dealer and give it back to the old. Congress didn't think this out at all.... Go figure.
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