House presses GM, Chrylser to restore dealership agreements

The House has broken with the Obama administration over a key part of auto industry restructuring by pressing General Motors and Chrysler to restore dealerships shuttered by their restructurings.

The House approved the car dealer measure Thursday as part of a spending bill. It would force General Motors and Chrysler Group to restore franchise agreements with dealers as a condition of partial government ownership.

Car dealers lobbied lawmakers to support the bill, arguing that the government and automakers have trampled on state franchise laws and knocked out dealerships with little notice. They warn that up to 200,000 jobs could be lost.

"An economic recovery will not be possible if we continue to throw people out of work," said Rep. Steve LaTourette, R-Ohio.

GM is reducing its 6,000-dealer network by more than 2,000 by not renewing franchise agreements next year and winding down stores with outgoing brands such as Pontiac, Saturn, Saab and Hummer. Chrysler cut 789 dealers in June, reducing its dealer count to about 2,400.

The dealership reductions were part of the GM and Chrysler bankruptcy deals. Chrysler emerged from bankruptcy in June, and GM exited on July 10, helped by billions in federal aid. The government now owns nearly 61% of GM and 8% of Chrysler.

The White House said Wednesday it strongly opposes the measure, arguing it would "set a dangerous precedent, potentially raising legal concerns, to intervene into a closed judicial bankruptcy proceeding on behalf of one particular group."

GM and Chrysler have fought the legislation, saying it will slow down their turnaround plans and hurt efforts to create a more profitable dealer network. Rep. John Dingell, D-Mich., an auto industry champion, said Congress was "playing with fire."

"If the auto industry goes down because we have taken sides in a quarrel between the auto industry and the dealers, we will have destroyed not only the dealers that complain but all of the other dealers," Dingell said.

House appropriations panel Chairman David Obey, D-Wis., countered that it would "get the auto dealers and the auto companies to sit down and work out a better appeals process so you don't have some significantly profitable auto dealers at the local level being unnecessarily put out of business."

GM and Chrysler have held discussions with House members and car dealers about potential concessions that would help the closing dealers receive a softer landing.

Senate Majority Leader Harry Reid, D-Nev., said earlier in the week that the issue was not atop his agenda, setting up a potential roadblock. Reid spokesman Jim Manley noted Thursday that Sen. Charles Grassley, R-Iowa, has introduced a similar measure and said Reid would monitor the legislation's progress.