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Lawmakers Chide Automakers Over Dealership Cuts
GM Issues State-by-State Closings List

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.

A federal bankruptcy judge approved Chrysler's plans to close nearly 800 of its 3,200 dealers, who were forced to remove their Chrysler, Jeep or Dodge signs this week and have until Monday to sell their inventory to the dealers that remain. GM has notified 1,100 dealers that they will not have their contracts renewed this fall, and hundreds more will be shed as part of the company's retrenchment, officials say.

But the dealers and their advocates argue that they pose little cost to the manufacturers and provide more opportunities for customers. The National Automobile Dealers Association, or NADA, estimates that the closures will result in the loss of up to 100,000 jobs.

"Terminating a dealership does not provide any material cost savings," NADA Chairman John McEleney testified during the hearing. "The retail network, the land, the buildings, the employees, training -- the dealers pay for all of this."

Domestic-auto dealers and their employees contributed more than $9 million to federal candidates in 2007 and 2008, while foreign-car dealerships and their workers gave more than $17 million, according to the Center for Responsive Politics. About three-quarters of the donations in both categories went to Republicans, with defeated presidential candidate Sen. John McCain (R-Ariz.) leading the pack.

Among sitting members of Congress, the top recipients of money from domestic dealers and their employees include McCain ($600,000), Buchanan ($67,000) and Sen. John Cornyn, a Texas Republican who received $88,000 during the 2008 election cycle. President Obama's campaign received $133,000 from the sector, records show. A notable exception is Maffei, who is championing the interests of Syracuse-area dealers despite their overwhelming support for his GOP opponent.

Buoyed by chatter on conservative Web sites, a handful of Republican lawmakers have alleged that the Obama administration has targeted GOP-friendly dealerships for closure. The administration says it has no input into which dealerships will close, however.

Others accuse the auto executives of bias. Rep. Mike Burgess (R-Tex.) pointed out that Rep. Barney Frank (D-Mass.) urged GM chief executive Fritz Henderson to maintain a parts distribution center in his district, and GM listened.

"What is the number I need to call? Is it 1-800-CAR-CZAR?" Burgess asked at the hearing. "I have a nagging suspicion that there is a political calculation here."

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