GM, Chrysler Defend Slashing Dealerships

Execs Tell Congress They Have No Alternative As They Fight To Overcome Bankruptcy

(CBS/ AP)  Last updated at 4:14 p.m. ET

The chiefs of General Motors and Chrysler told Congress on Wednesday they have too many dealers to support their slimmed down operations and sacrifices must be shared as they fight to overcome bankruptcy and survive. They acknowledged that slashing car dealerships is causing pain in communities around the U.S.

After hemorrhaging customers for decades and losing market share to foreign competitors, the two automakers said their companies need to scale back all their operations to become leaner and to hopefully return to profitability.

But car dealers are a powerful political constituency, contributing more than $9 million to federal candidates in the 2008 elections. They also are a significant source of tax revenue to communities and counties, employ hundreds in local communities and fulfill civic functions by sponsoring sports teams and contributing to charities.

GM is aiming for "fewer, stronger brands as well as fewer, stronger dealers," GM President Fritz Henderson said in testimony prepared for the Senate Commerce Committee. "These are tough times for everyone in the GM family."

Chrysler President James Press told the panel in prepared remarks: "Poor performing dealers cost us customers...If they don't sell cars, we don't either."

Pointedly reminding car makers they are now reliant on taxpayer money, senators of both parties complained about the impact of the dealerships being abruptly shut down, reports CBS News correspondent Bob Fuss.

Committee Chairman Jay Rockefeller, a Democrat, suggested both companies were abandoning customers and dealers, some of whose families have been in the business for decades.

"I don't believe that companies should be allowed to take taxpayer funds for a bailout and then leave local dealers and their customers to fend for themselves with no real plan, no real notice and no real help," Rockefeller told the automakers. "That is just plain wrong."

Those dealers "are looking into a black hole right now," while companies seem to be implying "that the dealers themselves are responsible for the companies' problems," Rockefeller said.

More than 2,700 dealerships are in line to lose their franchises. Two small-town dealers invited to appear before the committee spoke of the anguish ahead.

Russell Whatley, a Chrysler-Dodge-Jeep dealer, said his grandfather opened the business in 1919. "A 90-year investment is just gone," he said, "and neither my family nor my employees have any say about it."

Peter Lopez, a GM and Chrysler dealer, said in his prepared testimony: "I have met every financial obligation put forth by Chrysler and GM." Now, he said, "they want to shut me down."

"I'm a taxpayer," he said, "and they're (automakers) getting taxpayer dollars. It just doesn't add up."

The executives of the struggling companies said there are too many dealers, with many often competing with each other for sales. They suggested many of the dealerships date to the 1940s and 1950s, when motorists lived farther apart and Detroit automakers led the world in sales.

Chrysler is expected to emerge from bankruptcy protection within the next few days. General Motors filed for Chapter 11 protection on Monday and its officials said they hope to be able to emerge as a new company in 60-90 days.

Lawmakers contend the dealership closings will put thousands of people out of work and offer few savings to GM or Chrysler, which have received billions in federal aid as they attempt to restructure and return to profitability. The industry, in response, says taxpayers' investment is best protected by shedding unprofitable operations and strengthening the bottom line as fast as possible.

"It's not our place to change your decision," Sen. Kay Bailey Hutchison, a Republican, told the auto executives. "But it is our place...to make sure that everyone is treated as well as can be in these circumstances."

Chrysler LLC has identified 789 dealerships it plans to close next week, about a quarter of the company's dealership network. Its plan has drawn fire from lawmakers because dealers received only three weeks' notice.

General Motors told 1,100 dealerships it does not plan to renew their franchise agreements in late 2010 and expects to shed an additional 900 dealerships through attrition and by selling or discontinuing its Hummer, Pontiac, Saab and Saturn brands.

Chrysler dealers have only until June 9 to close down. "That termination date is needed to ensure that our new dealership structure will be firmly in place at or about the time the new company is formed with Fiat, something understandably important to Fiat," Press said.

Greg Signore, who owns Elm Dodge in Kearny, N.J., says he feels backed into a corner. And he's angry.

"We're the road kill in all of this," Signore told CBS News correspondent Michelle Miller.

He's one of nearly 800 Chrysler dealers nationwide given notice they will be closed. On top of that bad news, Chrysler ordered Signore to clear out his show room by June 9, reported Miller.

"After 60 years, they don't give me the decency to have a longer period of time to get rid of my inventory," Signore said.

Chrysler says its departing dealerships have resold or redistributed about 90 percent of their inventory and parts through a company program. But dealers being let go want the Obama administration to give them more time.

"We have an eight-month supply of vehicles and only three weeks to clear them out," Whatley told the committee.

GM said the dealers it's not renewing are being given until October 2010 to close.

Meanwhile, a group of Republicans distressed by the Obama administration's temporary nationalization of GM is proposing that congressional approval be required before money from the Troubled Asset Relief Program is used to buy a stake in a company.

The lawmakers complained that Congress had no opportunity to review the Obama administration's decision to take a 60 percent ownership of GM.

"General Motors needed a real bankruptcy, not a political bankruptcy," said Sen. Jim DeMint, a Republican.

"We end up owning 60 percent of the stock and not a single vote was cast on that plan," said Sen. Mike Johanns, a Republican. Johanns said the amendment, which they hope to consider Thursday, would apply to any money provided after May 29.

The third Detroit automaker, Ford Motor Corp., has not filed for bankruptcy protection and has not taken any federal bailout money. It has also not announced widespread dealership closings.

[rednomo]

Leadership?

Cheney Acknowledges Passing The Buck On GM: Bush Didn?t "Want To Be The One Who Pulled The Plug"

Last night on Fox News, Vice President Cheney admitted that the Bush administration deliberately decided to pass the buck on GM and let President Obama deal with the problem. Cheney admitted that he thought the ?right outcome was going to be bankruptcy,? but that President Bush didn?t want to ?be the one who pulled the plug.? Instead, the Bush administration put together a costly auto bailout to stem the tide until President Obama took office:

CHENEY: Well, I thought that, eventually, the right outcome was going to be bankruptcy. ? And the president decided that he did not want to be the one who pulled the plug just before he left office.

VAN SUSTEREN: Why?

CHENEY: Well, I think he felt, you know, these are big issues and he wouldn?t be there through the process of managing it, but in effect, would have sort of pulled the plug on GM and that was one of the first crises the new administration would have to deal with. So he put together a package that tided GM over until the new administration had a chance to look at it, decide what they wanted to do.

VAN SUSTEREN: But it?s cost us billions to get ...I mean, you know...

CHENEY: It has. ? And now the government owns a big chunk of General Motors. That bothers me. I don?t like having government own those kinds of major financial enterprises. I think it?s...it does damage to our long-term economic prospects when we get government involved in making those kinds of decisions.

[beach671]

""Who the heck really NEEDS an Escalade besides your neighborhood drug dealer?""

GM made $15,000 profit on every SUV. Where did the money go? $5 billion+ was invested in China.

Those operations in China they invested in are NOT part of the Bankruptcy and were separated from the company to secure those assets from investors, bond holders, stock holders....you know...the people that got ROBBED like the American public.

It should all be liquidated and GM disappear from Earth for investing in Communist China and trying to force Americans to compete with Chinese laborers....which we can't. Ain't their fault tho...Congress ordered it. So Congress is creating a Communist China car company...more chinese parts will be in GM's new vehicles. No more big American AC Delco parts manufacturing to supply the world.

So go buy Communist like Congress wants. Buy GM.

The odd thing now is Japan (Toyota), Russia (chrysler) and China (GM) will be running in NASCAR. Ain't that funny???

[ricklf1]

It's going to be a very long time before I purchase a GM car. I live out in the hills in California and GM saw fit to close our local dealer.

GM no loyalty for us, no loyalty for you!!! Bye-Bye.....
Posted by at 9:04 PM : Jun 3, 2009

I feel the same way in Northern Connecticut after they closed almost all of our local GM dealers here.
I liked my old Saturn automobile It was a dependable car. I would have bought another one. However now I feel The NEW GM can stick their remaining car brands where the sun don't shine.

[platteman]

All you left leaning liberals wanted change, now you got it, now you are unhappy. You bought a pig in a poke and the MSM never asked him any serious questions. So since you all are so in love with the man and his socialist ideals, live with them and shut the you know what up. You got what you wantedm, now live with it.
All of you bashed Bush for almost 8 years and were ever so happy to see him gone. Now OBAMBI has spent more of the money you don't have faster than anyone in history and you are complaining. Wait until all the states need a bailout and hand out and see what happens. All the left leaning liberals will want to help them out also. Now we don't have money to lend or spend, but we are printing money as fast as ppssible. Wait till you get a rolling coffin to buy and that is all you will be able to get. No vehicles to pull travel trailers, boats, Oh wait, you won't have those things either. You won't be able to afford them. Gas will be too expensive to buy.
You got what you deserved. You all voted for him. At least I know I voted for a hero, not some saul alanskey follower.

[nextgenman09]

Buy a ford!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
god bless Henry Ford.
Posted by mike_huntTheThird at 9:50 PM : Jun 3, 2009
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Why? They're pieces of junk too. I know, I used to own one. Everything fell apart EXCEPT the Mazda Power Train in it.....

[nextgenman09]

Why is it that Congress and its massive failure politicians always stick their nose into tiny little things as a publicity stunt yet fail to EVER exhibit any real LEADERSHIP and solve the REAL problems the US faces?

[Newster1]

Russell Whatley, a Chrysler-Dodge-Jeep dealer, said his grandfather opened the business in 1919. "A 90-year investment is just gone," he said, "and neither my family nor my employees have any say about it."

Awww poor babe!
Fact is they dont NEED 4 car dealers on every intersection! fact is, they don't need 15 dealers in a town with a population of 800 people! you dont need a car dealer on every block!

[burneb]

Not that I would necessarily believe anything an auto exec would say publicly, but it should be pretty clear that Chrysler and GM would not be trying to drop so many dealer franchises unless they figure it will improve their prospects to become profitable again.
This is allowed for in every dealer's franchise agreement with Chrysler or GM or Ford. If Fiat wanted to continue any Chrysler franchises, they would be kept or renewed. So it is a business decision by automakers. Painful as it may be to some localities, America just doesn't need as many new car salesmen as we have. For good or ill, that is how capitalism is supposed to work. Most of these dealers will stay open with used cars and service work.
Our best chance of salvaging American automakers is for pandering Congressmen not to get involved. They are trying to do just what they accuse Obama of doing, only his approach might work and theirs won't.
At least the Administration is trying to make the best of a bad situation and salvage an American auto industry. Of course there is a chorus of howls at anything being done, but imagine the howls if the Administration was NOT doing much about it.

It's going to be a very long time before I purchase a GM car. I live out in the hills in California and GM saw fit to close our local dealer.

GM no loyalty for us, no loyalty for you!!! Bye-Bye.....

[aggiekat2004]

Tell me why GM, ford or Chrysler have a Diesel engine?
Posted by dwilson59 at 6:52 PM : Jun 3, 2009
----------------

Tell me why VW can make a diesel-powered hybrid Golf that gets 69 miles per gallon in Europe, but that they can't bring it to the US.

A friend's father tried to import a Mini years ago that got over 70 mpg, but was told the "wheelbase was too small" to import it into the US.

Makes me think that the gas companies are in cahoots with the ridiculous American car companies. Who the heck really NEEDS an Escalade besides your neighborhood drug dealer?

[Ordflyer]

Are you suggesting that Jesus should run GM????

[troutfishyman]

I want a jeep rubicon but I am not going to pay 36k that is the reason they are in BK
Posted by dwilson59

Burger King?

[dwilson59]

Tell me why GM, ford or Chrysler have a Diesel engine?

[dwilson59]

We will all be driving the new Obamamobile

When you get it, it will have a 74% approval rating
Once you drive it you then notice it has no substance or power.

[dwilson59]

I smell a rat in this Chrysler fiasco. For one thing those Jeep models with the canvas tops are like cockroaches, they are all over the place, they can't be very expensive to build but they list between 16,000 for a bare bones to 27,000 for one with both tops and extras. The same can be said for the Chrysler 300. They list between 23,000 to 42,000 and they too are plentiful on the road. Chrysler seems to be selling plenty of cars but would have us believe otherwise.
Posted by thgdriver at 6:04 PM : Jun 3, 2009

I want a jeep rubicon but I am not going to pay 36k that is the reason they are in BK

[wdh3007]

The fact is Governement Motors former known as General Motors which this president claims he doesn't own but 60% sold the Hummer to the (PLA) People's Liberation Army or Chinese Communist Army not to the average chinese citizen who can't afford much of anything. Whoever did this deal should be tried for treason or impeached!

[platteman]

Yes in deed, the NON-Union workers are taking a big hit. of course the union workers are being taken care of. So you see the plan. Close the republican dealerships, let the democrats survive and they will make sure Obambi gets re-elected and we will have 8 years of our march to socialism.
Of course we have pay to play and this adminstration is it.

[thgdriver]

I smell a rat in this Chrysler fiasco. For one thing those Jeep models with the canvas tops are like cockroaches, they are all over the place, they can't be very expensive to build but they list between 16,000 for a bare bones to 27,000 for one with both tops and extras. The same can be said for the Chrysler 300. They list between 23,000 to 42,000 and they too are plentiful on the road. Chrysler seems to be selling plenty of cars but would have us believe otherwise.

[golfered2]

Sorry to say most of the workers at the closed dealerships were NON-UNION so the government or the Auto Task Force did not owe them any payback for votes the Democrats received last November.

[dwilson59]

OK this is what is going to happen. Once the BK is done they will owe the taxpayer 70 billion. You will get a rebate check for a new car or truck. Only the people that dont pay taxes will get check for a new car. Just wait and see