A controversial bill that potentially could restore the franchise rights of thousands of U.S. dealerships being forced to close by General Motors Co. and Chrysler Group LLC may not go before the U.S. Senate for approval until December.
The proposal, which is included in a $24 billion bill to fund the U.S. Treasury Dept. next year, was approved by the U.S. House of Representatives July 16 by a vote of 219-208.
The Obama White House, GM and Chrysler all oppose the bill, claiming the dealership closures are necessary for the auto makers to return to financial viability.
The bill wouldn't necessarily keep dealers in business, but rather force GM and Chrysler to argue their cases in state courts, a process sure to be expensive and lengthy.
At stake are 1,350 GM dealers and 789 Chrysler stores, many of which have been family-owned for generations.
The auto makers argue their dealer networks are too large and stores targeted for closure were underperforming. A smaller dealer body will allow remaining facilities to become more profitable, allowing dealers to reinvest in their businesses and maintain a better competitive footing.
GM spokesman Greg Martin says the auto maker will continue to work with Congress on a solution that allows the auto maker to move forward.
“From the beginning, GM has demonstrated a genuine commitment to go about dealer consolidation in a responsible and compassionate manner,” Martin tells Ward's. “That hasn't changed, and we hope dealers will join us at the table with Congress to find a resolution.”
John Bozzella, Chrysler senior vice president-external affairs, says his company also is working with Congress to address the situation and that the auto maker has handled dealership closures appropriately.
“Chrysler has had many conversations with members of Congress to explain the critical importance of an effective dealer network to the new company,” Bozzella says.
“We have also discussed with members of Congress and Congressional leadership actions Chrysler has taken to assure a soft landing for dealers who remain with the bankrupt old Chrysler LLC. “
Chrysler says more than 50% of the affected dealers remain in business, either “selling other manufacturer's new vehicles, selling and servicing used vehicles or operating groundbreaking new business ventures, such as acting as a buyer's advocate for consumers purchasing a vehicle.”
Because dealer reductions were part of bankruptcy reorganization, “there was not funding to repurchase vehicles, parts or special tools inventory,” the auto maker says.
That rationale does not hold up for with U.S. Rep. Steven C. LaTourette (R-OH), who authored the bill, noting forced dealer closures will result in the loss of some 200,000 workers.
“Under these policies, the only jobs that will be stimulated will be clerks at the unemployment offices in the country,” he says in a statement.
“The auto companies have never been able to demonstrate the dealers are a drag on their bottom line. I think many agree the trampling of state franchise laws is wrong, and many have no stomach for the way these dealers were treated.”
Rep. John Dingell, (D-MI), says Congress is “playing with fire” in its attempt to reverse the closures. “The fire could be a serious disaster, which we visit upon ourselves, upon the auto industry and upon all of those who are dependent on it.”
Critics say lost in the political posturing is the effect the closures have on the dealers and their employees.
Craig Sisk, owner of Sisk Buick Pontiac in Longview, TX, for example, says his dealership is being stripped from. “I'm surprised this could happen in the U.S.,” he tells Ward's. “
Even some dealers who have been spared feel a degree of uncertainty when it comes to the proposed legislation. “I have mixed emotions,” says Russ Shelton, owner of Shelton Pontiac Buick GMC in Rochester Hills, MI. “A lot of my friends were put out of business.
“All I know it was a sad day,” he adds. “There had to be another way, but I don't know how.”