GM, Chrysler defend dealer cuts

ByJayne O'Donnell, USA TODAY
June 3, 2009, 11:36 PM

— -- General Motors CEO Fritz Henderson and Chrysler President James Press had to defend efforts to trim their dealer networks and other moves before the Senate Commerce Committee on Wednesday.

Chrysler has given 789 dealers until Tuesday to close up shop. General Motors gm has given more than 1,000 dealers until late 2010 to wind down and also is requiring dealers who want to stay to sign new agreements that many believe violate their rights. Dealers are independent retailers who have franchise contracts with the automakers.

"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 notice and no real help," said Sen. Jay Rockefeller, D-W.Va., who chairs the committee. "Local auto dealers did not lead GM and Chrysler into financial ruin."

Last month, GM notified about 1,100 dealers that it did not plan to renew their franchises expiring in fall 2010. An additional 200 were notified this week. And on Tuesday, the day after it entered bankruptcy court, GM told remaining dealers they must sign agreements letting GM terminate their contracts more easily — or be forced to close.

"They are taking advantage of the fact they are in bankruptcy to change (franchise agreements) and make them much more unilateral," says National Automobile Dealers Association Chairman John McEleney, who is also a GM dealer. "It's a total overreach."

If Chrysler bankruptcy Judge Arthur Gonzalez approves Chrysler's dealer plan , the 789 dealers lose their Chrysler, Jeep or Dodge franchises on Tuesday.

GM and Chrysler dealer Pete Lopez of Spencer, W.Va., and Russell Whatley III, a Chrysler-Jeep-Dodge dealer in Mineral Wells, Texas, told the committee of their personal hardships and the effects on their communities. Lopez is losing both franchises. "What's happening today with America's new car dealerships is tragic, and Congress must assert itself," Lopez said.

Chuck Hackett, a Newell, W.Va., Chrysler-Dodge-Jeep dealer who will be kept by Chrysler after its sale to Italian automaker Fiat (likely to close next week), says he has sympathy for his colleagues but believes they were given ample warning. Chrysler has been pressing dealers for years to sell all its brands at every dealership and to improve stores.

Said Hackett, "The whole thing is harsh, but it has to be harsh."

Contributing: Detroit Free Press