House reportedly approves measure to restore dealerships despite bankruptcy blows
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]
Reader Comments (Page 1 of 3)
inteller 4:05PM (7/17/2009)
what they need to do is go back and reevaluate which dealers need to be closed. metro areas don't need 3-4 Chrysler dealers while a dealership in the middle of no where gets closed.
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cdwrx 4:16PM (7/17/2009)
I don't think that's enough data to come to your conclusion. Decision-makers had access to the financial viability of all the dealerships. We don't.
TigerMil 4:19PM (7/17/2009)
Agree.
This is a bankruptcy...there will be pain. And it isn't/shouldn't be up to the 535 bufos on the Hill to decide what dealerships live or die.
Hopefully Obama will show some hair and veto the bill.
Besides, most dealers are Republicans anyway and they deserve a haircut!
geo.stewart 4:45PM (7/17/2009)
ohTiger,
I love that you want to use partisan politics to make a financial/business decision regarding other people's money.
what a maroo
the dealer count should have been trimmed to 'rightsize' the count according to market but not so that all those Republicans paying for the oversize government got their 'just desserts'.
consider that on top of those 'fat cat republicans' probably trying to stay alive at a small dealership that there were 50-100 people also dependent on their living working their.
Its a shame that the dealers didnt give in as the market shrank and we have gotten to this point but we are here because too many THROUGHOUT the auto industry would not adjust past the mentality of the 50s and 60s to stay in line with the market; dealers, unions, mgmt alike.
Brad 5:00PM (7/17/2009)
Tigermil,
I was agreeing with everything you said right up until that last sentence and I wasn't quite sure what you meant by that.
Carguy 5:10PM (7/17/2009)
Why is it that people think that reducing dealers was about volumes of sales? In a perfect world, GM wants as many dealers selling cars as it possibly can have. The problem is when the dealers themselves start cross competing in any particular market. Then they start doing things that hurt the long term viability of the brand. They want badge engineered cars, they start deep discounting (commoditizing), competing GM against GM, degrading sales experiences, etc etc. GM doesn't want people to have to drive a long way to get service, but it also doesn't want dealers to have to compete with one another across the street. GM knows this and only eliminated the dealers that were contributing to this problem, nothing more.
To the dealers that "had just made such and such investment and therefore should be allowed to stay", well, that's the way the cookie crumbles. There was a dealer down the street that had better customer service, better numbers, or had made even MORE investment. You are in bed with a bankrupt company, sorry about your luck.
Tool 7:53PM (7/17/2009)
Don't worry. The New New New Chrysler will be out of business soon anyway.
According to the recent Merrill Lynch Car Wars Report, Chrysler is going to lose 6 pts of market share over the next 3 years and will be half its current size. So it will probably need to reduce its dealer ranks again.
jegjrfan 10:08PM (7/17/2009)
In my home area, the Chrysler situation was split between 3 places and the new Chrysler closed the Jeep portion at the Graham Automall and the Chrysler portion at Whitey's Automall. Neither would take them back as Graham has simply added onto the Hyundai holdings and Whitey's has moved the Nissan, Mercedes, Volvo, etc. down the street half a block and placed that building on the auction block. That building is exactly where the Dodge dealer(Spitzer) can go since they're building is so small and there is absolutely no place to expand. An AutoZone next door isn't going anywhere, a residential area directly behind isn't going anywhere and a $53Mil high school that opened in 2004 definitely isn't going anywhere.
Throwback 4:07PM (7/17/2009)
This will be interesting. GM and Chrysler will be forced to provide cars to dealers they wanted closed. I can see dealers sueing the companies for non-support if they favor other dealers of the ones they wanted closed. What a mess. How about congress passing a law requiring GM to keep the G8 while they are at it?
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Alex 4:12PM (7/17/2009)
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.
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Nixapatfan 4:27PM (7/17/2009)
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.
Nellydesign 4:38PM (7/17/2009)
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.
Alex Hobbs 5:44PM (7/17/2009)
Agree with you Alex, need to break some eggs to make an omelet. Its
unfortunate for those losing their jobs but if GM and Chrysler have
any chance there is going to be some pain, glad Obama sees this.
CaramelZappa 4:13PM (7/17/2009)
Governments should not run businesses, especially not ours.
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cdwrx 4:13PM (7/17/2009)
With a margin that narrow in the House, this probably won't make it through the Senate. Even if it does, it should be vetoed. Representatives are closer to their constituents so they have a lot of pressure to react this way. That's not as true for senators and presidents.
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TigerMil 4:21PM (7/17/2009)
Very astute political comment.
OTOH, the joint conference is rife with logrollers and many changes can be made in conference.
cdwrx 4:36PM (7/17/2009)
Thanks ,but I don't think I'm astute enough to understand your reply. Can you elaborate?
Tony 4:20PM (7/17/2009)
In Wellington County Ontario where I live we have lost 5 of 7 GM dealerships. There are townships that are now reviewing they're purchasing requirements to exclude GM due to the lack of dealership support. If you have a GM product at the North end of our county you face an hour plus drive for dealer support in Guelph. One of the dealerships in Guelph is a Pontiac dealer who faithfully renovated their Pontiac dealership at GM's "request" to the tune of 1.5 million plus only to be notified months after the grand opening that they have lost their right to sell GM vehicles. The companies under this bankruptcy have won the right to screw everyone from dealers, liability issues, to the taxpayer and more. GM is the new British Leyland and will be a zombie company for years until we have the balls to pull the plug.
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John P. 4:31PM (7/17/2009)
well said,
Imagine spending $1.5m of your own money making long-term upgrades like this. That dealership obviously thought they'd be making money in the future and now this. The worst part of the way this whole thing was done is that some profitable dealerships were cut off. Profits aren't something GM and now the Govt can't just throw away.
Edsel 4:28PM (7/17/2009)
More proof that we must demand that candidates for Congress achieve a minimum IQ score of 85 to run for office.
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