Politics as Usual: Dealers Protest Closings

Dealer Hearings

It’s common knowledge that for the auto companies to survive, some dealers have to go. That’s fine, unless you’re one of the dealers. Thus the long faces above. At hearings yesterday before Sen. Jay Rockefeller’s (D-W.Va.) Committee on Commerce, Science, and Transportation, dealers found a lot of sympathy. More than three dozen House and Senate members have already asked the Obama administration to help them.

Chrysler gave its dealers very short notice and plans to close nearly 800 of them next week. By the end of next year, GM wants to cut its number of dealers from 6,000 to 3,500; it told 1,000 of them that, if they agree by June 12, they could get life support until October 2010. The companies are playing hardball because time is of the essence if they are to achieve reorganization.

Senators of both parties were very sympathetic to the dealers. They are, after all, prime constituents, and there was much talk of Little League support, consequences to communities, and apple-pie fairness.

Peter Lopez, who owns Chrysler and G.M. dealerships in Spencer, W.Va., and Russell A. Whatley III, who has a Chrysler dealership in Mineral Wells, Tex., said they had paid the auto companies for vehicles and parts, as well as other fixed costs, like the right to hang the manufacturer’s sign.

Both men also bought additional inventory from Chrysler this year after Mr. Press [Chrysler president] told Chrysler dealers it would help the company remain viable. They were told months later that their franchises would be closed.

Sen. Carl Levin (D-Mi.) announced that Congress would not stand idly by: “We’re going to do what every other representative and member of the Senate will do from these states and districts,” Levin told reporters June 1. “There’ll be plenty of jawboning, persuasion.”

I’ll bet that means more input and interference from Congress than from the Obama administration in the operations of GM and Chrysler. Levin also suggested that more money might be forthcoming to ease dealer and community pain.

Well, should Congress just butt out, or do they have oversight in this situation? Leave us a comment.

—jgoods

1 Comment

  1. This is a great illustration of the short-sightedness that has pushed two of the big three into bankruptcy. These dealers don’t seem to understand that GM and Chrysler will NOT SURVIVE AT ALL with the bloated, poor quality dealer network they have now. I’ve seen the local propaganda for some of these dealers, all of whom claim that they are leading the charge in customer sales and service satisfaction, but of course they don’t mention their sales numbers. Anyone who has dealt with GM dealers for any length of time know how useless the dealer satisfaction rating system is, for two reasons– First, the dealers actively nag the customer to mark everything a “10” on sales and service surveys. Second, when GM does get a bad survey, they don’t really do anything. (Like when the Saturn dealer tried to defraud my wife by wanting to replace working air conditioner compressor to fix an electrical plug, and not under warranty. I fixed that one myself in 20 minutes at zero cost.) The biggest problem with GM’s dealership network is that there are far too many of them, and most end up with mediocre operations that must employ predatory practices to get adequate profits.

    There are a lot of outdated paradigms that are being wiped out in this depression (sorry, but it’s far too serious to be called a recession) and the 1950’s US car dealership network needs to go. In my area, there are about 65 GM Dealers to one Toyota dealer, and I can only guess how much it costs GM to support all those dealers compared to what Toyota is spending, which is just another reason GM’s costs are so high.

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