Chrysler, GM Dealers Look to Congress to Fight Terminations

Auto dealers are finding some allies in Congress to help the dealers fight mass terminations as part of the bankruptcy reorganization of Chrysler and General Motors.

For instance, U.S. Rep. Steve LaTourette, R-Ohio, on July 8 said he added an amendment to a larger spending bill that would require Chrysler and GM to reinstate agreements with dealerships.

LaTourette said he doesn’t buy the argument advanced by Chrysler and GM that cutting their U.S. dealer networks will save the automakers money.

“I don’t think Chrysler or GM has been able to demonstrate there is a savings associated with fewer dealers, since the dealers themselves bear the costs of operating their dealerships with little help from the manufacturers,” LaTourette said in a written statement.

“I think the closing of these dealerships was punitive and secretive, and it’s the most un-American thing for the government to help force you out of business and deprive you of the American dream,” LaTourette said.

Separately, GM President and CEO Fritz Henderson told a U.S. House committee last month that GM can save more than $1.1 million per year per closed dealership, by saving expenses for price discounts, advertising assistance, service and training, and information technology.

The dealers counter that any expenses they incur are more than offset by the revenues they produce.

According to the National Automobile Dealers Association, besides LaTourette’s amendment, there are additional, similar measures in the works in the U.S. House and the U.S. Senate. NADA is lobbying to attract co-sponsors for those measures.

LaTourette’s amendment is still a long way from becoming law, and a long way from reversing the momentum that Chrysler and GM have established in getting themselves reorganized and through U.S. Bankruptcy Court in double-quick time, with the strong backing of the Obama Administration.

GM has given the dealers it intends to terminate until October 2010 to wind down their businesses, but Chrysler’s dealer terminations took effect last month.