The decision by the two automakers, announced Thursday, raises the prospect of new life for some of the more than 3,000 dealerships that were slated to close as part of the broad auto industry restructuring. Dealers have loudly protested the decisions, and some said Thursday that the policy is merely an attempt by the automakers to placate Congress.
Just how many dealers could potentially be allowed to stay open remains unclear. The companies did not provide any estimates. Dealers involved in talks this fall with the automakers said likely only a handful of lots targeted for closure would survive, despite the new policy.
The plans of GM, based in Detroit, and Chrysler Group LLC call for face-to-face reviews with dealerships and binding arbitration for those who challenge closure of their showrooms. Chrysler said its review process would start Thursday while GM said talks with dealers would begin in mid-January.
Chrysler, based in Auburn Hills, Mich., said dealers will be given a chance to open new showrooms if an arbitration panel rules in their favor.
Dealer groups and a key lawmaker questioned the automakers’ latest plans, however, opening the possibility of Congress considering the dealer legislation anyway. The National Automobile Dealers Association said the GM proposal was a “positive step” but did not create “a sufficiently meaningful process that provides for a reasonable opportunity for dealer reinstatement.”
Rep. Christopher Van Hollen, D-Md., who has criticized the dealer cuts, said the GM and Chrysler plans “still fall short of what is needed to help reinstate profitable car dealers and put their employees back to work.”
GM, the largest U.S. automaker, said it would be more transparent about how it picked the dealers that will be closed. It will speed up payments to assist closed dealers, whose staff will need job retraining.
As part of its deep restructuring this year, GM has said it will cut 2,400 dealers from its 6,000-dealer network by next fall. Chrysler announced similar plans, slashing 789 dealers as part of its restructuring this summer. Both automakers say the cuts are needed to better align their dealer network with much lower demand for cars and trucks.
But dealers have accused the automakers of closing lots that were still profitable, and said the auto companies weren’t forthcoming about the criteria they used to decide who will close and who will stay open.
The House passed legislation in July that would force the companies to reverse their closure plans, though the Senate has not taken it up. The Obama administration opposes the measure. The federal government holds a majority stake in GM and 10 percent in Chrysler.
Talks brokered by Congress between the dealer groups and the automakers began in September, but had stalled over disagreements over factors like the review process for dealers slated to close.
GM’s vice president of U.S. sales, Susan Docherty, said in GM’s statement Thursday that the company appreciated the efforts of Congressional leaders to reach a “non-legislative resolution to address dealer concerns that were critical to the development of GM’s comprehensive plan.”
But dealers who took part in talks said the automakers broke off negotiations and made the announcement on their own.
Tammy Darvish of the Washington-area Darcars chain, which has three dealerships slated for closure, said at most, only about 50 dealers would have their decisions reversed.
“Both of their plans are a sham,” she said.
GM spokesman Greg Martin said the company released its proposal “because at some point you have to move forward.” He would not speculate on how many dealer closures would ultimately be reversed.
Lawmakers have warned that if an agreement isn’t reached, legislation would move forward to deal with the closures. Most of the Senate Commerce Committee wrote a letter two weeks ago to Chrysler and GM seeking more information about the talks and warning that dealers should be treated fairly.
Legislation appears to still be a possibility. A spokeswoman for House Majority Leader Steny Hoyer, D-Md., who helped set up the talks, said that GM and Chrysler must give dealers broad leeway to prove that their franchises should remain open.
Congressional leaders involved in the negotiations, including Hoyer, D-Md. and Illinois Sen. Dick Durbin, the Senate majority whip.
Dave Jackson, whose GM franchise agreements are set to expire next August, has already closed his dealership in Three Forks, Mont., and is weighing what to do with the dealership he owns 50 miles away in Livingston, Mont. He has already laid off 26 of 32 employees and sold his new car inventory. But he said he would consider appealing GM’s decision.
“If General Motors allows me to, we may be able to stay open,” he said.