The Democratic-controlled House yesterday spurned the strong recommendations of President Obama and voted to undo the shuttering of more than 2,000 Chrysler and General Motors dealers closed as part of the restructuring of those two companies.
A source involved in the auto restructuring called the vote "hardcore bipartisan NIMBY," using the acronym for "Not In My Back Yard," a derisive term for politicians who take the most parochial views of issues, defying the "greater good."
As part of the auto companies' restructuring, Chrysler shut down 789 dealerships and General Motors informed roughly 1,300 dealerships that their franchise deals wouldn’t be renewed in 2010.
The legislation, drafted by Rep. Steve LaTourette, R-Ohio, and added in the Appropriations to the $24 billion Treasury Department funding bill, would stop those dealership closings and require Chrysler and GM to pursue any future closings in court.
“I don’t think Chrysler or GM has been able to demonstrate there is a savings associated with fewer dealers, since the dealers themselves bear the costs of operating their dealerships with little help from the manufacturers,” LaTourette said. “I think the closing of these dealerships was punitive and secretive, and it’s the most un-American thing for the government to help force you out of business and deprive you of the American dream.”
The larger bill was approved last night by the House by a vote of 219 to 208.
While not issuing a veto threat — the bill has yet to go through the Senate, where the support of Senate Majority Leader Harry Reid, D-Nev., is less than assured — the White House earlier this week said that President Obama's administration "strongly opposes the language in the bill that attempts to restore prior Chrysler and General Motors (GM) franchise agreements."
Arguing that the Small Business Administration on July 1 "implemented a new program to provide guaranteed floor plan financing loans" for dealers hurt by the restructuring, the administration said that "the decision by Chrysler and GM to rationalize their dealer networks was a critical part of their overall restructuring to achieve long-term viability in order to save jobs in the long run, and to improve the prospects for the companies’ repayment of the substantial taxpayer investments. Without the significant steps these automakers have taken to revamp their operations, the companies would have failed – imperiling every GM and Chrysler dealer in the country."
The move by Congress, the Obama administration said, "would set a dangerous precedent, potentially raising legal concerns, to intervene into a closed Judicial bankruptcy proceeding on behalf of one particular group at this point."
Last Fall, Sen. Bob Corker, R-Tenn., said that U.S. automakers "have all kinds of legacy issues they have not been able to deal with. Let me point out one. General Motors has 7,000 dealers. They probably need about 1,500 dealers. What the dealers did years ago is, they went around and got states to pass laws that said that GM could not do away with their dealerships. We have had the strong dealers actually calling our office and telling us they actually have hurt themselves by putting these state laws in place, because there are so many dealers that each of them is having trouble making a profit. It would be a tremendous disservice for us to grant money to these companies without causing them to reorganize."
But earlier this week the House Appropriations Committee approved LaTourette's amendment. House Appropriations Chairman David Obey, D-Wisc., agreed with LaTourette, saying he'd heard "legitimate concerns from a doggone good" auto dealer from his congressional district.
“Dealerships across Wisconsin and the 7th district have received notices that they are to close affecting places like Antigo, Chippewa Falls, St. Croix Falls, Phillips, Medford, Marshfield, Wisconsin Rapids, Wittenberg, Cornell, Cumberland and many others," Obey said at the beginning of June. "The loss of dealerships in many of these communities will present a real hardship."
But Rep. John Dingell, D-Mich., a longtime supporter (some might say enabler) of the US auto industry, disagreed.
“This is a very fragile industry and its survival even without that amendment is not necessarily assured,” Dingell said. “The amendment could be a burden that the industry simply cannot carry.”
This argument was repeated by the automakers.
“Chrysler has had many conversations with members of Congress to explain the critical importance of an effective dealer network,” said a Chrysler spokesman.
Said a GM spokesman: "this legislation seeks to overturn the bankruptcy court’s decision after the fact to protect a single stakeholder among so many that have been called to sacrifice.”