Dems Split in Fight Over Chrysler, GM Dealer Cuts

Last Updated Jul 22, 2009 8:33 AM EDT

The fight in Congress over mass dealer dismissals at Chrysler and General Motors is heating up, with opposing testimony expected today from the car companies, and from dealers.

Politically, the auto dealer dispute has a strong Democrat-versus-Democrat aspect, as Democratic congressmen, especially in the House, are lined up against the Democratic Obama Administration, which oversaw fast-track bankruptcy proceedings for Chrysler and GM.

On Tuesday, July 21, the Treasury Department Senior Advisor Ron Bloom of the president's auto task force defended the Chrysler and GM dealer cuts, as essential to get Chrysler and GM back on track towards profitability, and he asked Congress not to intervene.

"The decision to invest taxpayer dollars into these companies required all stakeholders to make difficult sacrifices, and at this point it would set a dangerous precedent, potentially raising enormous legal concerns, to say nothing of the substantial financial burden it would place on the companies, to intervene into a completed portion of a judicial bankruptcy proceeding on behalf of one particular group," Bloom said in prepared testimony.

U.S. Rep. Steve Cohen, D-Tenn., is chairman of the House Subcommittee on Commercial and Administrative Law, where yesterday's hearing was held. He grilled Bloom over the dealer cuts, citing an African-American Chrysler dealer from Cohen's home district in Memphis, who was terminated by Chrysler despite having a successful business.

"The affected auto dealers contend that their stores are not a cost to either G.M. or Chrysler. The dealers assert that G.M. and Chrysler benefit from having more dealers, not fewer. The car dealers also contend that G.M. and Chrysler selected dealerships for termination using an arbitrary selection process," Cohen said in prepared remarks.

Cohen asked the general counsels for both Chrysler and GM to appear today, in addition to a list of dealers.