Senators Back Chrysler and GM Ex-Dealers, But Maybe Too Late

Last Updated Nov 29, 2009 3:45 PM EST

The issue whether Chrysler and General Motors acted fairly in terminating thousands of dealerships refuses to die, but it is showing its age, and that's bad for the dealers.

Earlier this month, Sen. John D. (Jay) Rockefeller IV, (D-W.Va.) demanded an "update" from Chrysler and GM regarding dealer treatment.

"Given the federal government's ownership stake in Chrysler and GM, it is our shared obligation to ensure all impacted dealers are treated as fairly as possible," said Rockefeller, in his capacity as chairman of the U.S. Senate Committee on Commerce, Science, and Transportation, in a letter to Chrysler and GM. The letter was co-signed by Kay Bailey Hutchison (R-Texas), ranking member of the Commerce Committee.

However, with each passing month, it becomes less likely that the dealerships in question can ever turn back the clock and get back into the new-car business for the same brands.

Chrysler terminated close to 800 dealers earlier this year, effective immediately. GM gave notice to about 2,600 dealers they would be terminated by the fall of 2010. However, GM cut those dealers off from new-car deliveries. That means more than 3,000 dealerships need to close, or try to survive on used-car sales, plus parts and service alone. Many have already closed.

The issue has become one of fairness. At first, some dealers argued that terminations were illegal under state franchise laws, let alone unfair. The car companies argued that bankruptcy superseded state law. The dealers seem to have conceded that battle.

As it stands today, it's also becoming obvious that the best dealers can hope for is a bigger payoff, as opposed to reinstatement.