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Published: Wednesday, 6/3/2009

GM, Chrysler defend slashing dealerships

ASSOCIATED PRESS

WASHINGTON Fighting to survive, top executives from General Motors and Chrysler on Wednesday defended their decisions to slash dealerships around the country, calling the moves unavoidable despite the pain to many loyal dealers and customers.

GM president Fritz Henderson and Chrysler President James Press told the Senate Commerce Committee in prepared testimony that there are too many dealers and the networks date from the 1940s and 1950s when motorists lived farther apart and Detroit automakers led the world in sales.

But after hemorrhaging customers for decades and losing market share to foreign competitors, they said the companies need to scale back all their operations to become leaner and profitable as they operate under bankruptcy protection.

"Reinventing GM real change does require shared sacrifice," Henderson said. "These are tough times for everyone in the GM family. And, as part of the GM family, our dealers are also being asked to bear some of the sacrifice in order to build a stronger, more viable GM."

As for GM's smaller rival, "there's not enough business for the number of dealers Chrysler has today, given that we have less than two-thirds of our former sales volume," Press said.

"Poor performing dealers cost us customers. It's true that dealers are our customers, but it works both ways. If they don't sell cars, we don't either."

Committee Chairman Jay Rockefeller, D-W.Va., suggested both companies were abandoning customers and dealers, some of whom had been dealers for decades.

"I don't believe that companies should be allowed to take taxpayer funds for a bailout and then leave local dealers and their customers to fend for themselves with no real notice and no real help," Rockefeller said in prepared remarks. "That is just plain wrong."

He said that the companies seemed to be implying "that the dealers themselves are responsible for the companies' problems."

The committee made the prepared testimony available to The Associated Press in advance of Wednesday's hearing.

Lawmakers contend the dealership closings will put thousands of people out of work and offer few savings to GM or Chrysler, which have received billions in federal aid as they attempt to restructure and return to profitability.

Chrysler LLC has identified 789 dealerships that it plans to close next week, about a quarter of the company's dealership network. The Auburn Hills, Mich., automaker's plan has drawn fire from lawmakers because dealers received only three weeks' notice.

General Motors Corp. told 1,100 dealerships that it does not plan to renew their franchise agreements in late 2010 and expects to shed another 900 dealerships through attrition and by selling or discontinuing its Hummer, Pontiac, Saab and Saturn brands.

Two small-town dealers singled out by the committee contended that the loss of their dealerships could bring personal and community anguish.

"I have met every financial obligation put forth by Chrysler and GM," Peter Lopez, a GM and Chrysler dealer in Spencer, W.Va., said in prepared testimony. "Now ... they want to shut me down. What gives the government the right to do that? I'm a taxpayer and they're getting taxpayer dollars. It just doesn't add up."

Russell Whatley, a Chrysler-Dodge-Jeep dealer in Mineral Wells, Texas, said his grandfather opened the business in 1919. "A 90-year investment is just gone," he said, "and neither my family nor my employees have any say about it."

Chrysler dealers have only until June 9 to close down. "That termination date is needed to ensure 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," Press said.

Chrysler says that Chrysler dealerships have resold or redistributed about 90 percent of their vehicle inventory and parts through a company program. But dealers being let go want the Obama administration to give them more time to close their franchises and provide additional financing to help Chrysler buy back inventories, parts and specialized tools from the dealerships.

"We have an eight-month supply of vehicles and only three weeks to clear them out," Whatley told the committee.

GM said the dealers it's not renewing are being given until October 2010 to shut down. That gives them an opportunity to "sell down their vehicle inventories and provide warranty service to customers, thus winding down their business in an orderly fashion," said Henderson.

Car dealers are a potent political force, contributing more than $9 million to federal candidates for the 2008 elections.

GM and Chrysler have said the dealership reductions are a painful part of their restructuring, which also has required concessions from union workers and bondholders. Seeking to address the concerns, Troy Clarke, president of GM's North American operations, and Press met with committee members before the hearing.

Requests to the administration to give dealers better terms creates a potential conflict for the White House, which has said it will refrain from running the day-to-day operations of the companies and delegate those decisions to the auto companies' management. The government is expected to receive a 60 percent stake in GM and a 10 percent share of Chrysler in exchange for the federal aid.



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