Car Dealers Push to Save Their Stores

More than 150 car dealers plan to descend on Capitol Hill starting today, in a lobbying push aimed at saving their sales outlets as General Motors and Chrysler move to sharply pare back operations.

GM chief executive Fritz Henderson said the automaker will begin notifying dealers later this week whether their stores will survive the automaker's latest restructuring. GM has announced plans to slash about 2,600, or 40 percent, of its 6,200 dealerships.

Chrysler dealers, meanwhile, fear that 800 to 1,000 of 3,200 sales centers could be shuttered. In court documents and testimony over the past week, Chrysler executives said just half of the company's 3,200 dealers account for 90 percent of the Chrysler cars sold in the United States.

A spokeswoman for Chrysler declined to comment about the company's plans for dealers.

John McEleney, chairman of the National Automobile Dealers Association, said the plight of dealers has not been getting enough attention in the wrenching consolidation being pushed by the Obama administration's autos task force.

"We need lawmakers to speak to the White House and try to explain that this process needs to be slowed down," McEleney said, explaining the lobbying campaign. "We need a more orderly transition."

State dealer associations are preparing their members for the fallout. They are advising dealers about what rights they have in Chrysler's bankruptcy case. In some cases, they are directing dealers to law firms to help them navigate the case, and even to assist individual dealers in their own bankruptcy filings. Though federal law can trump state laws in bankruptcy proceedings, federal bankruptcy law often requires courts to apply state and local franchising rules and other mandates.

McEleney said the cuts could result in the loss of 187,000 dealership jobs nationally. Additionally, McEleney said cutting a vast number of dealerships could substantially reduce revenue for GM and Chrysler in the short term, further impairing their recovery.

For years, Detroit automakers have had internal projects aimed at paring back the numbers of dealers, many of which were opened in prior decades when the companies dominated the U.S. market as the Big Three. The companies have argued, for example, that if there were fewer Chevrolet dealers, each individual dealer would sell more, making the remaining dealerships more profitable and the company healthier.

"These theories sound good on a white paper, but in reality they don't make sense," said Peter Kitzmiller, president of the Maryland Automobile Dealers Association. "If having a small number of dealers in the best locations was the key to success, then Saturn would be the most successful brand in the country."

Instead, he said, Saturn failed because the company began rebranding GM sedans and selling them as Saturns. Kitzmiller also rejects another argument put forth by automakers looking to cut dealerships: that the success of Japanese automakers is partly the result of their low dealer count. Toyota has 1,800 dealers in the United States, compared with GM's 6,200.

"That has nothing to do with why they are successful," he said. "They are successful because they have quality product. The product is going to determine success. The number of dealers is sort of out on the periphery."

The dealer groups say their members already assume much of the risk for ensuring their operations are profitable. Dealers, they say, own their own inventory, the store's computer software, the car parts, the signs over the dealership and even the marketing brochures on the sales floor.

"When the manufacturer ships a car, the manufacturer gets paid," said Don Hall, president of the Virginia Automobile Dealers Association. "The idea that we are going to eliminate thousands of dealers is an outrage. And the American public ought to be asking 'Why is it? What's the value of it, and why are they micromanaging to that degree?' "

Staff writer Tomoeh Murakami Tse in New York contributed to this report.