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Lawmakers question dealership losses, government aid in GM, Chrysler bankruptcies

June 4th, 2009 12:00 am by Associated Press

WASHINGTON (AP) -- Government-led bankruptcies of General Motors and Chrysler are drawing opposition in Congress, where bailout-weary lawmakers want explanations for the billions in more federal aid and the planned shuttering of hundreds of car dealerships.


A group of Republicans wants to give Congress veto power over the expenditure of any bailout money by the government to buy a stake in a company. They complain Congress had no opportunity to review the Obama administration's decision to take 60 percent ownership of GM and a smaller stake in Chrysler.


"I think it's all starting to hit us in the face what government-managed economies feel like," said Sen. Jim DeMint, R-S.C.


Sen. Chris Dodd, D-Conn., who leads the Senate Banking Committee, scheduled a hearing for next week to examine the administration's auto task force. Dodd said he wanted to review the use of taxpayer funds to restructure the auto industry and the decisions by the Obama administration to take ownership roles in GM and Chrysler.


Executives with General Motors Corp. and Chrysler LLC received a chilly reception Wednesday when they told senators their companies need to shed hundreds of dealerships as part of their bankruptcies. They called the decisions painful yet necessary moves to right-size their companies.


"This is our last chance to get it right," GM Chief Executive Fritz Henderson told the Senate Commerce Committee. He cited "tough times for everyone in the GM family."


Chrysler President Jim Press said underperforming dealers are making it hard for his company to return to profitability. But Chrysler was "working hard to achieve a soft landing" for them.


"I think 'soft landing' is wishful thinking," responded Sen. Frank Lautenberg, D-N.J., comparing it to a "parachute with holes."


Chrysler has identified 789 dealerships it plans to close by June 9, about a quarter of the company's network. General Motors told 1,100 dealerships it does not plan to renew their franchise agreements and expects to shed an additional 900 dealerships through attrition and by selling or discontinuing its Hummer, Pontiac, Saab and Saturn brands. By 2010, it hopes to reduce its 6,000 dealers to about 3,500 to 3,800, Henderson said.


Chrysler's Press defended the company's June 9 termination date for dealers, saying it was needed so their dealership structure was in place when its new company is formed with Italian automaker Fiat Group SpA.


But car dealers told the committee they were being forced to close shop with lots full of vehicles after heeding Chrysler's call to take on a larger inventory.


"We have an eight-month supply of vehicles and only three weeks to clear them out," said Russell Whatley, a Chrysler-Dodge-Jeep dealer in Mineral Wells, Texas.


Lawmakers pressured GM and Chrysler to do all it could to help the dealers cope with the closings. "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," said Commerce Committee Chairman Jay Rockefeller, D-W.Va. "That is just plain wrong."


Chrysler is hoping to emerge from bankruptcy protection within the next few days. General Motors filed for Chapter 11 protection on Monday, and its officials said they hope to be able to reorganize as a new company in 60 to 90 days.

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