Automakers warn against reversing dealer cuts

WASHINGTON -- Chrysler warned a U.S. House committee Wednesday that it could face liquidation if Congress reversed the cuts of 789 dealers as part of its bankruptcy.

Meanwhile, General Motors told the panel it is spending $600 million to provide a "soft landing" to the 1,300 dealers it has targeted to close by October 2010, and said the cuts were necessary to succeed outside bankruptcies.

The two companies testified to a House Judiciary subcommittee holding a second day of hearings on the dealer cuts at GM and Chrysler. While the House has already approved a bill reversing the cuts, dealers are pressing a similar bill in the Senate, where support has been harder to win so far.

Both the automakers and the Obama administration are strongly opposed to the proposal, and the automakers have been trying to negotiate a compromise that would end the dispute. But the talks have not included any discussion of money for the dealers who have or will be shut down.

Ron Bloom, the leader of the Obama administration's auto task force, urged a Judiciary Committee panel on Tuesday not to meddle in the dealer closings. Bloom said the plan would set a "dangerous precedent" and could jeopardize taxpayer recovery of billions in federal aid to the car companies.

Louann Van Der Wiele, vice president and associate general council for Chrysler, said the dealer cuts were essential to selling Chrysler's assets to a new partnership with Fiat, while leaving the remnants now called Old Carco in bankruptcy court to be sold off.

Reversing the cuts "will simply take Chrysler back to the future that Old Carco faced not long ago — and this time, without the option of a purchaser for substantially all of its assets. Complete liquidation, with all of its dire consequences, could follow," she said.

Van Der Wiele and Kevyn Orr, an attorney with Jones Day who worked on Chrysler's bankruptcy, said the company had arranged to transfer all of the vehicles left at the 789 dealerships by Thursday, with additional arrangements for tooling and helping laid-off workers find new jobs.