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]