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Published: Thursday, 5/21/2009

Lawmakers seek flexibility for US auto dealers losing franchises

ASSOCIATED

WASHINGTON Under performing Chrysler dealers targeted for closing should get more time to wind down their car dealerships, lawmakers said Thursday, as several groups urged the Obama administration to reconsider its work to restructure the faltering U.S. auto industry.

Sen. Kay Bailey Hutchison, R-Texas, pushed a proposal to give Chrysler dealers 60 days to close their dealerships instead of three weeks outlined by the company. Seeking leverage, her measure would prevent the Treasury Department from providing funding to an auto company that failed to give a dealership at least 60 days to wind down its operations and sell its inventory.

"I fundamentally disagree with the decision to arbitrarily and unnecessarily close down these auto dealers," Hutchison said. It was unclear if her plan, which could be attached to a spending bill, would overcome procedural hurdles but lawmakers held discussions with Chrysler and the administration to seek more flexibility for the dealers.

The widespread dealership closings were among several areas of concern for lawmakers, bondholders and consumer groups, who want the Obama administration to reevaluate its handling of General Motors and Chrysler.

Chrysler LLC, which has received $5.8 billion in federal aid and filed for bankruptcy, said last week it intends to close about a quarter of its 3,200 U.S. dealerships by June 9. General Motors Corp. has told about 1,100 of its dealers about 20 percent that they would be dropped by late next year. Auto dealers say the swift closing of dealerships could lead to significant job losses and leave many dealerships with large inventories of unsold vehicles.

General Motors has received $15.4 billion in government loans and faces a June 1 deadline to complete its restructuring or head into Chapter 11 bankruptcy reorganization.

"We must work to keep as many of these businesses open as possible," wrote Sen. Jay Rockefeller, D-W.Va., in a letter to GM and Chrysler executives. In West Virginia, Rockefeller said 17 of 24 Chrysler dealerships were expected to close and an undisclosed number of GM franchise agreements would end in October 2010.

Separately, consumer advocate Ralph Nader was urging Congress to hold hearings into dealership and factory closures at Chrysler and GM, arguing that Congress has ceded oversight of the automakers' restructuring to an auto task force appointed by President Barack Obama.

During a House hearing, Nader was expected to question whether the automaker really needed to close so many dealerships and factories and whether taxpayers' interests were being adequately protected. Nader and others have noted the restructuring could lead to GM building more cars in Asia for import into the United States.

A group of retired GM bondholders, meanwhile, met with lawmakers to demand fairness from the government-led restructuring of the automaker. GM has said bankruptcy is possible if it fails to persuade bondholders to swap $27 billion in bond debt for stock.

Bondholders would end up with 10 percent of the company's shares under the offer, which expires next week. But a committee representing the bondholders has sought a 58 percent ownership stake.

The bondholders contend the government offer is unfair because a health care trust run by the United Auto Workers union would receive a much larger share of the company. The UAW said Thursday it had reached a tentative agreement on contract concessions with GM and the federal government involving funding for the health care trust and labor cost reductions.

"We all know we're going to take a hit. We understand that. But it should be an equitable hit," said Dennis Buchholtz, 67, of Warren, Mich., who bought $98,000 worth of GM bonds in 2005 and could lose most of his investment.



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