GM, Chrysler Say Cutting Dealerships Necessary

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WASHINGTON - 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 cited "tough times for everyone in the GM family."

Chrysler President James Press said underperforming dealers are making it hard for his company to return to profitability. Still, he said, Chrysler was "working hard to achieve a soft landing" for them.

"I think `soft landing' is wishful thinking," said Sen. Frank Lautenberg, D-N.J., as committee members channeled a multitude of complaints from homestate GM and Chrysler spurned dealers.

Small Dealers Feel Big Pain

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. About two dozen others were in the audience.

Russell Whatley, a Chrysler-Dodge-Jeep dealer in Mineral Wells, Texas, told the panel 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 set by Chrysler and GM but still "they want to shut me down."

While GM is giving the dealers being cut loose until October 2010 to shut down, Chrysler gave its cast-off dealers only a three-week notice that runs out on June 9.

Chrysler Gives Short Notice

Committee Chairman Jay Rockefeller, D-W.Va., asked Lopez if he could shut down his Chrysler operations 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 softly.

Rockefeller told the automakers he didn't believe that companies should be allowed to take taxpayer funds for a bailout - as both Chrysler and GM have done - and then leave local dealers and their customers to fend for themselves.

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," said Rockefeller.

Scaling Back a Must

The auto executives said there are far 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 executives said their companies need to scale back all their operations to become leaner.

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 reorganize as a new company in 60-90 days.

Thousands of Lay Offs

Lawmakers argued that the dealership closings will put thousands out of work and offer few savings to GM or Chrysler, which have received billions in federal aid as they attempt to restructure. The industry argues that 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."

Chrysler LLC has identified 789 dealerships it plans to close next week, about a quarter of the company's network.

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

Henderson told the committee that 500 dealers had formally appealed GM's decision to sever ties. As of now, GM has reversed itself on 11 of them, he said.

Chrysler's Press defended the company's June 9 termination date for dealers, saying it was needed so 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."

Chrysler says its departing dealerships have resold or redistributed over 90 percent of their inventory and parts through a company program. But departing dealers 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.

Lawmakers Make Their Case

Meanwhile, a group of Republicans distressed by the 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.

"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.

Associated Press writer Jim Kuhnhenn contributed to this report.
     
Copyright 2009 by The Associated Press.  All Rights Reserved.

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