Senate reviews closing of GM, Chrysler dealerships

WASHINGTON – Top executives from General Motors and Chrysler face tough questions from lawmakers about sweeping plans to close hundreds of car dealerships as the auto companies undergo government-led bankruptcies.

The executives will appear before a Senate committee Wednesday to talk about their dealership plans.

Lawmakers contend the dealership closings will put thousands of people out of work and offer few savings to GM or Chrysler, which have received billions in federal aid as they attempt to restructure and return to profitability.

Chrysler LLC has identified 789 dealerships that it plans to close next week, about a quarter of the company’s dealership network. The Auburn Hills, Mich., automaker’s plan has drawn fire from lawmakers because dealers received only three weeks’ notice.

General Motors Corp. told 1,100 dealerships that it does not plan to renew their franchise agreements in late 2010 and expects to shed another 900 dealerships through attrition and by selling or discontinuing its Hummer, Pontiac, Saab and Saturn brands.

“The egregious time frame and terms of these franchise terminations seem unprecedented to me,” wrote Sen. Jay Rockefeller, D-W.Va., who chairs the Senate Commerce Committee, which will hold the hearing.

GM chief executive Fritz Henderson and Chrysler Vice Chairman and President Jim Press were testifying before the committee along with several dealers being forced to close. Car dealers are a potent political force, contributing more than $9 million to federal candidates for the 2008 elections.

GM and Chrysler have said the dealership reductions are a painful part of their restructuring, which also has required concessions from union workers and bondholders. Seeking to address the concerns, Troy Clarke, president of GM’s North American operations, and Press met with committee members before the hearing.

Discontinued Chrysler dealerships have resold or redistributed about 90 percent of their vehicle inventory and parts through a company program, spokeswoman Lisa Barrow said. GM’s plan was designed to help dealerships slowly wind down their businesses.

But car dealers want the Obama administration to give shuttered Chrysler dealers more time to close their franchises and provide additional financing to help Chrysler buy back inventories, parts and specialized tools from the dealerships.

The request creates a potential conflict for the White House, which has said it will refrain from running the day-to-day operations of the companies and delegate those decisions to the auto companies’ management. The government is expected to receive a 60 percent stake in GM and a 10 percent share of Chrysler in exchange for the federal aid.

Sen. Byron Dorgan, D-N.D., who met with the GM and Chrysler executives on Tuesday, said Congress would not try to “go through the administration to get them to do something in the companies.”

But Dorgan said it was reasonable for the lawmakers to ask Chrysler: “Are you sure you’re making the right decision in the way you treat these kinds of dealers in certain rural areas?”