GM, Chrysler: Slashing Dealerships Is Necessary
STEVE INSKEEP, host:
As Chrysler wraps up a bankruptcy and General Motors begins its, both companies are cutting ties with local car dealerships, many of them anyway. Both automakers say they need to trim their franchise networks. But in a Senate hearing yesterday, lawmakers asked if the companies are abandoning loyal dealers and customers. Of course you have to cut costs, but maybe not in my backyard. NPR's Audie Cornish reports.
AUDIE CORNISH: Meet Peter Lopez, a West Virginia auto dealer who was a star witness of the Senate Commerce Committee hearing.
Mr. PETER LOPEZ (West Virginia Auto Dealer): Our dealerships service six county areas in West Virginia and I am the face of Chrysler and General Motors to my community and my customers.
CORNISH: Lopez has two franchise contracts, one with General Motors and one with Chrysler. Both are being cancelled. Lopez himself sunk well over a million into his dealerships in the last two years alone. He made showroom upgrades and employs 18 people. None of that mattered.
Russell Whatley, a Chrysler dealer from Mineral Wells, Texas is facing a similar fate.
Mr. RUSSELL WHATLEY (Chrysler dealer, Mineral Wells, Texas): Every dealer's biggest fear is on June the 9th we lose all options on these cars. We can no longer sell them, we can no longer dealer trade them, they have no incentives, no rebates, no warranties, they're just planter boxes.
CORNISH: June 9th is Chrysler's deadline to close 789 of its dealerships. Chrysler president James Press says in order to make the company viable for its pending sale to Italian automaker Fiat, they had no choice but to consolidate the stand-alone dealerships of Jeep, Dodge, and the Chrysler brands.
Mr. JAMES PRESS (Chrysler President): We are trying to bring all three brands under one roof, because by trying to run three separate brands in channels and dealer bodies we've gone broke. We can't do that any longer.
CORNISH: Trimming a bloated dealer network and driving up business at the remaining ones is also the goal at General Motors. GM President Fritz Henderson says that in order to survive, the company must shed more than 2500 dealers because there are too many of the franchises too close together.
Mr. FRITZ HENDERSON (General Motors President): Over the years, many GM dealers could not earn enough profit to renovate their facilities and retain top tier sales and service staffs. And for those who could raise capital, it made little business sense for them to invest in a market already saturated with GM dealers.
CORNISH: But lawmakers took issues with the way the companies were conducting the closures with little oversight and no real chance for appeal. Senate commerce chair Jay Rockefeller of West Virginia called the whole process unfair.
Senator JAY ROCKEFELLER (Democrat, West Virginia): I honestly don't believe that companies should be allowed to take taxpayer funds for a bailout and then leave it to local dealers and their customers to fend for themselves with no real plan, with no real notice, no real help. It's just plain wrong.
CORNISH: But it was not clear to lawmakers, such as South Carolina Republican Jim DeMint what, if anything at all, should be done.
Senator JIM DEMINT (Republican, South Carolina): I think it's starting to hit all of us in the face what government managed economies feel like.
CORNISH: What it felt like was a four hour barrage of questions from lawmakers to the auto firms about their decision-making. The Senators quizzed the two automakers about the speed of the closures and the selection process. They demanded GM turn over a list of the franchises slated for closure that it's so far tried to keep secret.
Senators asked what would happen to consumers and dealers in minority communities or in rural communities or on a particular street in their home state. They asked GM to improve their appeals process. They asked Chrysler to make good on its pledge to help canceled dealerships get rid of inventory. Missouri Democrat Claire McCaskill pointed out the limits of how far lawmakers can go.
Senator CLAIRE MCCASKILL (Democrat, Missouri): I think we all have to acknowledge that these companies are broke and they're not going to succeed unless they get smaller, and we've got to figure out a way forward that's fair to the dealers, but at the same time, I don't think we can micromanage and insist they stay bigger. That's why they went broke.
CORNISH: Still more than 300 local car dealers are set to fight the Chrysler closures in bankruptcy court today. While GM has let 1100 franchise dealers know that it won't be renewing their contracts next year, and the company is deciding whether to close more factories to prevent excess inventory.
Audie Cornish, NPR News, the Capitol.
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