GM, Chrysler fight reopening closed dealers

updated 4:53 p.m. ET July 9, 2009

WASHINGTON - General Motors and Chrysler urged lawmakers Thursday to block legislation that would prevent them from consolidating their dealership networks, warning it would complicate their emergence from government-led bankruptcies.

With GM poised to exit bankruptcy protection, company leaders pressed House members to overturn an amendment approved late Tuesday by a House committee that would force General Motors Corp. and Chrysler LLC to restore franchise agreements with dealers as a condition of partial government ownership.

“The dealers had to be part of the restructuring — therefore this legislation would be problematic to getting that piece of it done,” said Mark LaNeve, GM’s North American vice president for sales and marketing.

The Michigan auto companies are closing nearly 3,000 dealerships as part of their sweeping reorganization plans under bankruptcy protection, a move supported by the Obama administration.

GM and Chrysler, which have received billions in federal aid, have said their large dealer networks have forced many franchises to compete against each other and drive down prices.

GM is reducing its 6,000-dealer network to about 4,100 by not renewing franchise agreements next year and winding down stores with outgoing brands such as Pontiac, Saturn and Hummer.

Chrysler cut 789 of its dealers as part of its restructuring plan, reducing its dealer count to about 2,400 as part of its alliance with Italian automaker Fiat.

But the moves have angered lawmakers who contend that many of their hometown car dealers were shuttered without a full explanation or enough time to prepare.

“Let’s have an orderly discussion and if you’re a car dealer and they want to close you, then they can’t just ignore state franchise laws,” said Rep. Steve LaTourette, R-Ohio, who successfully pushed the amendment to reinstate the dealerships.

LaTourette’s efforts could face a procedural challenge next week but the dealers have key allies. Rep. David Obey, D-Wis., chairman of the House Appropriations Committee, has said he would fight to save the amendment and House Majority Leader Steny Hoyer, D-Md., who has pushed pro-dealer legislation, has urged the companies to find a compromise.

“I hope we can find a way that allows the legitimate grievances of auto dealers to be properly heard and resolved in a fair manner,” said Rep. Chris Van Hollen, D-Md., an ally of Hoyer. “This process has been totally arbitrary.”

Hoyer met with GM and Chrysler officials on Wednesday, along with Steve Rattner, the head of the Obama administration’s auto task force, to discuss the targeted dealerships. A White House spokeswoman declined comment.

Chrysler said in a statement Thursday that the legislation would “jeopardize the viability of the new company” and it used “sound business judgement” to reconfigure its dealerships.

“These decisions were not taken lightly, nor were they made irrationally,” said Chrysler, which emerged from bankruptcy on June 11.

Rep. Gary Peters, D-Mich., circulated a letter Thursday to House Speaker Nancy Pelosi, D-Calif., urging Congress to treat “all parties affected by auto restructuring fairly and equitably,” including dealers, workers, retirees and auto suppliers. He suggested funding it through TARP funds being returned to taxpayers by financial institutions.

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