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July 8, 2009

House panel votes to undo GM, Chrysler dealer shutdowns


WASHINGTON -- By a unanimous vote, a U.S. House committee has approved a measure that would restore 2,100 dealers either cut or scheduled to be closed by General Motors Corp. and Chrysler Group LLC.

The vote comes amid growing support in the House for the proposal, with more than 200 cosponsors signed on to a similar bill. Dealers will hold a lobbying event next Tuesday to press for the plan in the House and Senate.

The bill would turn back the clock to before the companies filed for bankruptcy, restoring the 789 dealers cut by Chrysler and 1,300 dealers GM chose to wind down.

The measure from Rep. Steven LaTourette, R-Ohio, was approved by the House Appropriations Committee late Tuesday. While it could face some procedural hurdles, Democratic leaders vowed to protect it from challenges when the larger bill reaches the House floor, and the companion bill has the backing of House Majority Leader Steny Hoyer, D-Md.

Executives from GM and Chrysler have both told Congress that cutting dealers was essential to their survival outside of bankruptcy, saving each company billions of dollars a year and strengthen their remaining sales force.

“This legislation, if passed, would put our long-term viability at risk,” said GM spokesman Greg Martin.

Chrysler declined to comment.

The White House also declined to comment today, but the Obama administration has told lawmakers and industry officials that it strongly opposes the measure.

The bankruptcy cases orchestrated by the Obama administration allowed GM and Chrysler to escape state laws that dealers had shaped over several decades making it expensive for automakers to unilaterally cut dealerships. GM estimated that its decision to shutter the Oldsmobile brand cost at least $1 billion in payments to dealers.

Automakers contend they face several costs from having too many dealers, with GM saying propping up its dealer network cost $2.1 billion a year, while Chrysler arguing that too many dealers had cost it $1.5 billion a year in lost revenue.

LINK:House panel votes to undo GM, Chrysler dealer shutdowns | Freep.com | Detroit Free Press
 

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Showdown brews

Showdown brews over plan to cut GM, Chrysler dealers

Posted Thursday, Jul 9, 2009, 11:53 am in Employee News

Last modified on Thursday, Jul 9, 2009, 11:53 am.

Congress and the Obama administration are colliding over General Motors Corp.’s and Chrysler Group LLC’s moves to shed 2,100 dealers, which the House appears poised to reverse next week, the Detroit Free Press said.

One version of a bill to save dealerships has nearly enough cosponsors to pass in the House, where dealers have focused their lobbying so far, the paper said. A similar bill, which passed unanimously in a House committee late Tuesday, would restore the 789 dealers cut from Chrysler and 1,300 dealers GM is winding down. It would essentially turn back the clock, restoring the franchise deals that GM and Chrysler had before their bankruptcies, the Free Press said.

Across the nation, the closing of dealerships struck a nerve on main streets that the rest of the turmoil in the auto industry has not, the paper said. The nation’s powerful dealer lobby has summoned its political might to press its case through legislation. A Senate version of the bill has only 15 sponsors, but dealers said they focused first on passing the bill in the House, the story said. (Detroit Free Press)
 

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Chrysler Statement in Response

Chrysler Statement in Response to House Appropriations Committee Action

Auburn Hills, Mich. , Jul 9, 2009 - Chrysler used sound business judgment during the bankruptcy process to determine the appropriate size for its dealer network. Annual new vehicle sales have declined roughly 40 percent in the last 2 years, which leaves Chrysler at a level that cannot support the previous size dealer network.

Chrysler continues to work with discontinued dealers on issues related to redistribution of inventory, parts and special tools.

The reorganization under the guidance of the U.S. Bankruptcy Court necessitated that tough, painful business decisions be made, including reducing the number of manufacturing facilities, employees and dealers. These decisions were not taken lightly, nor were they made irrationally. The opinion of the Court that approved Chrysler’s motion to reject certain dealer agreements affirmed the necessity of reducing the size of the company’s dealer network and the rationale used to determine what dealer contracts were rejected.

The intent of legislation such as H.R. 2743 would jeopardize the viability of the new company.
 

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Dealer closure battle rages

Dealer closure battle rages

Posted Friday, Jul 10, 2009, 10:49 am in Employee News

White House officials and executives from General Motors Corp. and Chrysler Group LLC met with a top congressional leader Wednesday to try to reach a deal to head off legislation that would reverse the rulings of a federal bankruptcy court, The Detroit News.

GM’s North American chief Troy Clarke; Mark LaNeve, GM vice president for sales, service and marketing; Chrysler Deputy CEO Jim Press; and John Bozzella, Chrysler vice president for external affairs, met with House Majority Leader Steny Hoyer for nearly 90 minutes on Capitol Hill about the contentious issue, the News said.

Also attending was the White House’s top adviser on autos, Steve Rattner, as well as Brian Deese, another Obama administration auto adviser, the paper said. A person familiar with the meeting said Hoyer urged the automakers to reach some agreement with angry dealers by late Friday to head off the legislation, the story said. (The Detroit News)
 

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Congress puts microscope on GM, Chrysler

Monday, July 20, 2009
Congress puts microscope on GM, Chrysler

Washington -- The White House vowed not to micromanage General Motors Co. and Chrysler Group LLC, but Congress is stepping up its scrutiny of the automakers' actions now that the government owns most of GM and a chunk of Chrysler.

There is growing agitation in Washington over how the companies are restructuring post-bankruptcy and the role the Obama administration played in decisions to close thousands of auto dealers and shutter factories nationwide, costing tens of thousands of jobs.


GM and Chrysler are eager to get out of the headlines in Washington and back to the business of building and selling cars. But one price of a government bailout is getting caught in political crossfire.

Lawmakers are pushing to revoke the dealer shutdowns, demanding that the White House release records that document its involvement in restructuring decisions, and holding more hearings.

The House Judiciary Committee, chaired by U.S. Rep. John Conyers, D-Detroit, is set to start a two-day hearing Tuesday on GM's and Chrysler's plans to close more than 3,000 dealers combined. Lawyers for the automakers are expected to testify at the sessions, which come despite two days of hearings on the subject earlier this summer.

The Conyers hearings follow a flurry of activities in the House last week.

On Friday, the House Financial Services Committee voted unanimously to prod the White House to turn over information about the Obama auto task force's oversight of GM and Chrysler's restructuring. The committee expressed frustration with a number of actions by the automakers and related companies.

That vote came a day after the House passed a spending bill with a provision to restore the franchise agreements of nearly 800 dealers Chrysler has already closed and about 2,500 GM retailers expected to shut down by late 2010.

The message from some in Congress is that since taxpayers provided GM and Chrysler with about $65 billion in loans, the automakers should listen to lawmakers' concerns.

"This was a chance for Congress to say you don't get to crush state franchise laws, and you don't get to put thousands of dealers out of business because you feel like it," said Rep. Steve LaTourette, R-Ohio. Republicans consider the auto bailout a resonant political issue -- even President Barack Obama has noted that his approval ratings for lending money to the automakers are among his lowest.

GOP lawmakers in Congress have tried to take advantage of that by introducing a number of bills that would force a quick sale of the government's stakes in the companies -- with some suggesting the shares be distributed to all taxpayers.

"American taxpayers now own GM, and President Obama is both commander- and carmaker in chief," the National Republican Committee said on July 10, the day GM emerged from bankruptcy.

Legislation to block the dealer closings is gaining momentum -- separate from the dealer provision attached to the spending bill last week.

The Automobile Dealer Economic Rights Restoration Act of 2009 was introduced June 8, but had 258 co-sponsors as of Friday -- 16 more than it had Thursday. A Senate version has 27 supporters.

Senate Majority Leader Harry Reid, D-Nev., is not eager to take up the bill, so it isn't likely to come up in the Senate before Labor Day. The automakers hope to negotiate a deal with dealers.

As the dealer controversy grows, it is clear the government is not just an observer in the remaking of GM and Chrysler.

The Obama administration is working to sign off on the remaining new members of GM's board after taking a key role in choosing former AT&T Chairman and CEO Edward Whitacre Jr. to be chairman. Critics have suggested that Obama was meddling in some business decisions because he was the one who called Michigan's congressional delegation May 31 to tell them GM would file for bankruptcy but would not move its headquarters out of Detroit. GM filed for court protection the next day.

At least one lawmaker used his clout to protect a GM parts depot in his district from quick closure.

House Financial Services Committee Chairman Barney Frank, D-Mass., who supports efforts to get more information from the White House on its role in restructuring decisions for GM and Chrysler, caught flak from Republicans for prodding GM CEO Fritz Henderson to reverse the closing. He also e-mailed the White House expressing his irritation. A day after a meeting with Frank, Henderson delayed the depot's closing.

Sen. Lamar Alexander, R-Tenn., gave Frank a mock "car czar" award, calling him a "Washington meddler."

"Car executives trying to manage complex companies will be reduced to the status of some assistant secretary hauling briefing books between subcommittees answering questions," he said.

Rep. Christopher Lee, R-N.Y., has questioned the auto task force's support for GM taking over the pensions of hourly Delphi workers but not salaried pensioners, who could lose up to 70 percent of their pensions. GM is Delphi's former parent.

"As 60 percent owners of the new General Motors, American taxpayers deserve a public explanation of how this decision was made," Lee said.

"My view is it's fundamentally unfair."

LINK:Congress puts microscope on GM, Chrysler | detnews.com | The Detroit News
 

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U.S. Senate Commerce chair seeks GM/Chrysler audit

U.S. Senate Commerce chair seeks GM/Chrysler audit

Fri Jul 24, 2009

WASHINGTON Congress turned up the heat on General Motors Corp and Chrysler Group with a senior lawmaker calling for a U.S. Treasury Department review of decisions to cut more than 2,000 dealers.

Senator John Rockefeller, chairman of the Commerce Committee, asked on Friday for the internal watchdog of the agency's financial bailout fund to look into the matter.

"There is substantial confusion, even among dealers themselves, as to how GM and Chrysler selected dealerships to terminate and what benefits, if any, they might gain by doing so," the Democrat from West Virginia said in a letter to Neil Barofsky, special inspector general of the Troubled Asset Relief Program (TARP).

Last week, the House Financial Services Committee approved a resolution that would require the Obama administration's autos task force to turn over documents on dealer decisions and other matters related to the automakers' bankruptcies. That proposal requires approval of the full House of Representatives.

The task force, which is a unit of the Treasury Department, has provided more than $60 billion in bailout financing from the TARP fund for GM and Chrysler.

Chrysler has terminated 789 dealer franchises while GM plans to stop doing business with 1,300 showrooms in 2010 to streamline sales and save money.

Hundreds of dealers assert their rights were trampled during the Chrysler and GM bankruptcies, leaving them with little or no legal recourse.

Dealer groups say more than 150,000 jobs are at stake, a figure that resonates with lawmakers eager to prevent layoffs in a recession where joblessness nationwide is approaching 10 percent. Auto sector employment has been hit particularly hard due to severe contraction at GM and Chrysler and downsizing at Ford Motor Co, plus bankruptcies at suppliers.

Legislation approved by the House and now before the Senate would require GM and Chrysler to restore dealer franchise rights. The legislation's fate is uncertain with the White House strongly opposed to the measure.

A senior Chrysler executive said this week the company, now operating in an alliance with Italy's Fiat, again could face the prospect of liquidation if the dealer measure is approved.

LINK:U.S. Senate Commerce chair seeks GM/Chrysler audit | Politics | Reuters
 

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Congress failed auto dealers

Thursday, July 30, 2009
Manny Lopez
Congress failed auto dealers

Thankfully, Congress will soon be in recess and the dog-and-pony auto dealer show will hibernate.

Sadly, we had to witness it to begin with.

At least that was my take. But quite a few auto dealers across the nation took issue with my column last week that said the dealer-closing hearings that were held were solely to score political points and save legislators' own hides -- and fat-cat donations -- rather than actually foster any changes for the more than 3,000 General Motors Co. and Chrysler Group LLC dealers that have shut down or will.

I stand by that because it's true.
Dealership dissents

Not everyone agreed with me, and understandably so.

"I am one of the terminated Chrysler dealers who does not want my franchise back. What I do want is fair market value for my franchise that I had to pay for, and fair market value for my parts that I paid for, and fair market value for my special tools that I had to pay for," Bert Molitierno, whose Verona Jeep dealership in Pennsylvania was closed, told me. "I owned a business that served my community and employed close to 30 people for 55 years. I think I deserve something more than a Dear John letter and three weeks to wind down my life's work."

Molitierno now operates a used car sales and service business and his company's Web site has been changed from one featuring Jeeps to one that urges people to "stop Chrysler" by signing a petition to Congress.

"If political grandstanding gets me the compensation I deserve, then I wish them all the best," he said.
Chrysler dealers hit hard

It's hard to argue with that.

Chrysler dealers, unlike those from GM, didn't get any wind-down cash and were left holding inventory they bought from the company and couldn't then resell because their franchise agreements were voided. They got shortchanged.

Molitierno, like many, didn't file for bankruptcy himself. He said he cashed out insurance policies, took out some loans and maxed out his credit cards to stay afloat and pay his debts.

That's what dealers have done for decades -- served as honest and hard-working businesses in local communities everywhere. No one is arguing that point.

What's happened in the auto industry is unfortunate and sad, and yes, unfair to the auto dealers and the tens of thousands of others who got fired or laid off or shut down.

Molitierno's story isn't unique and unfortunately, the petitions and calls to Congress are not likely going to change the decisions of the bankruptcy court.

If the Congress members squawking the loudest were serious about helping the dealers, they would have been out in front of the issue, not behind it.

But that would have put their necks on the line instead of dealers, and when the ax is about to fall, it is clear who is always going to be saved.

[email protected] (313) 222-2536 Auto Editor Manny Lopez's column runs Thursday.

LINK:Congress failed auto dealers | detnews.com | The Detroit News
 

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Chrysler seeks to block rejected dealers’ state suits

Chrysler seeks to block rejected dealers’ state suits

Posted Monday, Aug 17, 2009, 1:16 pm in Employee News

Chrysler Group has asked a U.S. Bankruptcy Court judge to prevent rejected dealers from suing the automaker in state courts to get their lost franchises back, the Automotive News reported.

Old Carco, the operating entity for the Chrysler assets left behind in bankruptcy, asked the judge to stop lawsuits filed by 11 dealerships in state courts or administrative bodies, the paper said. The suits want “to force the new Chrysler to continue to honor the very dealer agreements” the Bankruptcy Court previously allowed Chrysler to reject, the motion states, the Automotive News said.

The document accuses the 11 dealerships, which it refers to as “noncompliant,” of trying to do an “end run” around the bankruptcy process, the story said. It says the lawsuits assert that a state’s motor vehicle statute “trumps the provisions of sections 362, 363 and 365 of the bankruptcy code,” the publication said.

Chrysler said in a prepared statement: “Old Carco was forced to take this action as a result of the actions of the 11 dealers. By taking the actions noted in the motion, the rejected dealers have directly violated the orders of Judge Gonzalez and the bankruptcy court. Instead of appealing the sale and rejection orders in the proper bankruptcy court forum, they are seeking to do an end run on the court’s orders.”

A hearing on Old Carco’s request to halt the state court lawsuits is scheduled for Aug. 27, the story said. (Automotive News)
 
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