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GM, Chrysler leaders say dealership closings needed to preserve auto jobs

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

WASHINGTON (AP) -- General Motors and Chrysler executives defended the closings of hundreds of dealerships Friday as House lawmakers questioned whether the decisions would save any money or help the troubled companies rebound.


"Many dealers and the communities they serve frankly feel blind-sided," said Rep. Greg Walden, R-Ore.


GM CEO Fritz Henderson told a skeptical House panel that the dealer cuts were "quite painful" but necessary to preserve over 200,000 jobs at GM's remaining dealers.


"In essence, this is our last chance," Henderson told the House Energy and Commerce Committee's oversight and investigations subcommittee.


The committee released a GM document that provided a state-by-state list of 1,323 dealerships the automaker plans to wind down. Pennsylvania had the most with 90, followed by Ohio with 79, Illinois with 66 and California with 65. New York had 60 and Michigan, where GM's headquarters is based, had 58 outgoing dealerships. Alaska was the only state spared.


Chrysler Deputy CEO Jim Press said the cuts were "the most difficult business action" of his career but were among the shared sacrifices by the United Auto Workers union, bondholders and others needed to save the company.


"Going through bankruptcy was not our choice," said Press, who along with Henderson and the other witnesses were required to raise their right hands and testify under oath.


House members expressed dismay at the closing of 789 Chrysler dealerships and plans by GM to shutter about 1,350 by the end of next year. They said many rural communities would be left without dealerships while thousands of jobs would be lost without any firm guarantees that GM and Chrysler, which have received billions in federal aid, would benefit long-term.


"When it comes time to purchase a new vehicle, many of my new constituents will abandon GM or Chrysler and go to whichever brand is still locally sold by a person they trust within their community," said Rep. Bart Stupak, D-Mich., the subcommittee's chairman.


"How does it help to close profitable dealerships?" asked Rep. Diana DeGette, D-Colo., who said 14 profitable Chrysler dealerships were closing in her home state.


Dealers said the closings of their stores risked putting 100,000 jobs at risk and charged the companies with failing to be transparent about how they reached their decisions. Many dealers said their stores had been performing well despite the economic downturn.


"We have been GM to our community," said Bob Thomas, owner of Bob Thomas Chevrolet-Cadillac in Bend, Ore. "Now it is a dark time when GM must abandon our town, our region and us."


Frank Blankenbecker III, the dealer-principal of Carlisle Chevrolet-Cadillac in Waxahachie, Texas, said he learned in May that his 83-year-old dealership would lose its Jeep store and his GM franchise agreement would not be extended. His voice cracking, Blankenbecker honored his father, a World War II veteran, by wearing his father's Bronze Star lapel pin.


"I am glad that he is not alive to witness this travesty. To have risked his life for a country that would do what they are doing would destroy him," he said.


Daniel Kiekenapp, general manager of Tacoma, Wash., Dodge, said he was puzzled when he received his termination notice from Chrysler because he had net sales exceeding $1.7 million last year and was the top Dodge dealer in western Washington last April.


"We have been reduced to being a used car lot and a neighborhood automobile repair facility," Kiekenapp said.


The auto executives said their companies have been slowed by too many dealers, with many representing the same company often competing against each other for sales. Many dealerships date to the 1940s and 1950s, they said, when motorists lived farther apart and Detroit automakers dominated the U.S. market.


Henderson and Press said after losing customers and market share to foreign competitors, their companies needed to scale back all their operations to become leaner and return to profitability.


Press said the 789 discontinued dealers met only a portion of their minimum sales responsibility and represented 55,000 units of loss sales and $1.5 billion in lost revenue in 2008.


Henderson said the dealership reductions would allow the company to reduce many dealer support programs such as incentives and help to dealers with their inventory resulting in annual savings of more than $2 billion a year.


In total, GM is expected to reduce its dealer body by 2,500 through the shuttering of dealerships, anticipated attrition and the shedding of its Saturn, Hummer, Pontiac and Saab lines.


Henderson told the committee that 856 dealers had appealed GM's decision to sever ties. As of now, GM has reversed itself on 45 of them, he said.


Italian automaker Fiat Group SpA closed a deal earlier this week to become the new owner of most of Chrysler's assets, saving the company from liquidation. The new company will be called Chrysler Group LLC.


GM filed for Chapter 11 protection on June 1 and the company hopes to emerge from bankruptcy as a new company in 60-90 days.

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