Lawmakers Call GM, Chrysler Dealership Cuts Into Question

In his testimony on Capitol Hill, Chrysler President Jim Press, center, defended the dealership cuts, which affect every state except Alaska.
In his testimony on Capitol Hill, Chrysler President Jim Press, center, defended the dealership cuts, which affect every state except Alaska. (By Susan Walsh -- Associated Press)
By Dan Eggen and Kendra Marr
Washington Post Staff Writers
Saturday, June 13, 2009

Out of the 1,323 General Motors dealers targeted for elimination, the most will come from Pennsylvania.

Ninety dealerships will be forced to wind down in the state. Pennsylvania is followed by Ohio with 79, Illinois with 66, California with 65 and New York with 60.

GM, which has declined to name individual dealers, released the state-by-state list for the first time yesterday to a House Energy and Commerce subcommittee. And lawmakers vented their frustration, demanding that GM and Chrysler executives provide even more detailed explanations of their restructuring decisions.

"I don't understand how they're costing you money," Rep. Mike Doyle (D-Pa.), who invited a Pittsburgh dealer to testify, told the automakers. "I think they're a revenue stream for you guys. And if for some reason this has to happen, I want to know why you're not taking care of people who spent 70 years and generations selling your cars."

GM and Chrysler dealer closings have afflicted nearly every state (only Alaska has been spared), and it's set off a wave of anger on both sides of the aisle. Yesterday, Democratic and Republican House members -- those who have praised and ridiculed President Obama's restructuring of the auto industry -- took turns pummeling the automakers, the Treasury Department and bankruptcy court over the dealer reductions.

Last week, a Senate committee did the same. In addition, a bipartisan group of House lawmakers has introduced legislation that would halt the closings and restore protections under state franchise laws, and the Senate is considering similar measures.

Dealerships have long been a significant political force on Capitol Hill and in many congressional districts, donating nearly $27 million to lawmakers in the last election cycle alone -- primarily to Republicans. In many parts of the country, car dealers are often leaders in their communities and frequently have close ties with the federal lawmakers who represent their areas.

"These are big names in local areas and having them shut down has a huge ripple effect in communities like mine," Rep. Dan Maffei (D-N.Y.), one of the main sponsors of dealer-protection legislation in the House, said in an interview this week. He added that the wave of closures is "happening so suddenly that not only is it impacting the dealers, it's impacting everyone around them."

Like most Republicans, Rep. Vern Buchanan (Fla.) has strongly criticized the Obama administration's moves to rescue GM and Chrysler as an improper interference in free markets. But Buchanan, who holds an ownership stake in more than a dozen Florida car dealerships, has not hesitated to speak out for another beleaguered industry: the thousands of car dealers that GM and Chrysler have slated for closure.

"I would agree with the auto companies that there should be some consolidation," said Buchanan, co-owner of a Dodge dealership on Chrysler's closure list, in an interview. "But this is not the way to do it."

Carmakers, the administration's auto task force and industry analysts warn that a congressional move to halt dealership closures would threaten the fragile recovery being attempted by GM and Chrysler, further harming their competitiveness at a time when new car sales are in the gutter.

"The cost to Chrysler of an over-sized dealer network includes both lost sales and excessive spending," said Chrysler President Jim Press during the 4 1/2 -hour hearing yesterday.

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