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Corker denounces government's role in dealership closings

Sharon Hayes • May 14, 2009 at 12:00 AM

The federal government is driving the restructuring of General Motors and Chrysler, including the closure of a large chunk of auto dealerships across the country. And that’s just wrong, says U.S. Sen. Bob Corker of Tennessee.

“I know the companies need to be restructured, and I think every dealer would tell you that. What I think is highly objectionable is the fact that the federal government is driving that process,” Corker told the Times-News on Thursday.

“That is something that as a country is a huge departure from the way relations have been between government and private industry. I strongly object to the government playing such a strong role in making this happen.”

Now in bankruptcy, Chrysler — under the direction of a government automotive task force — filed documents in bankruptcy court on Thursday, including a list of nearly 800 dealerships targeted for closure. On the list is Alley’s Chrysler Dodge and Don Hill Jeep Eagle in Kingsport.

GM is expected to issue its own list of dealerships targeted for closure. Under pressure from the Obama administration to devise a restructuring plan by June 1, GM plans to close 2,600 of its 6,200 dealerships across the country.

Corker said GM, too, is expected to file bankruptcy.

“I don’t think there’s much question about that, and they’re going to use bankruptcy to negate state laws as it relates to dealers,” he said.

Corker said all 50 states have laws in place to protect auto dealers from automakers. But when automakers file bankruptcy, those codes override state laws, allowing automakers to withdraw from franchise agreements, resulting in dealership closures.

Corker said the type of bankruptcy filed by Chrysler — called a 363 bankruptcy — is particularly controversial.

“Many people believe that it’s pretty abusive as it relates to the various constituent groups involved, and that includes dealers,” Corker said. “But that’s the course of action the administration has chosen.”

Corker, a member of the Senate Banking Committee and lead Republican during Senate negotiations of legislation to aid the domestic auto industry, laid out a plan in December to restructure the automakers outside of bankruptcy. That plan included a renegotiation of union contracts.

But the United Auto Workers refused the plan.

“So instead of the companies leading this, the administration has taken a very active, hands-on approach,” Corker said.

He said that neither he nor any of his colleagues in Congress have any control over which auto dealerships are targeted for closure as part of restructuring plans for GM and Chrysler.

He said those decisions are being left up to the companies, the UAW and car czar Steve Rattner, who heads the government’s automotive task force.

“I do know that the numbers of dealers that GM had relative to its sales was very, very large,” said Corker.

Still, he noted that GM has a large market share in rural areas of the country.

“That by its very nature says that they’re going to have more dealers that in some cases are selling less volume because they’re in rural areas,” Corker said.

Whatever happens, Corker said he wants to make sure that surviving dealerships have financing available to succeed in today’s market.

“I think that what we can do is ensure that there is financing available for those that do exist,” Corker said. “Without that, they absolutely cannot survive.”

Corker said he’s been pushing the U.S. Treasury and Federal Reserve to create what’s called an asset-backed security mechanism to give auto dealers greater access to floor-plan financing. He explained that dealers must have a financing mechanism in place to keep inventory on their lots. In many cases, the credit crunch caused financing to dry up, leaving dealers in the lurch.

Corker said the new financing mechanism could be structured as part of the Term Asset-Backed Securities Loan Facility — known as TALF — which was created late last year by the Federal Reserve Board to help increase credit availability and support economic activity.

In the meantime, Corker said he plans to have members of his staff travel across the state this summer to speak with auto dealers about their needs.

“We’re going to be in the Tri-Cities area meeting with dealers, trying to talk through with them what some of the issues are that they’re dealing with,” Corker said.

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