GM to reverse closing of 41 dealerships

Automaker to reverse plans for 41 affiliates; bill introduced in House to hinder shutdowns

David Shepardson / Detroit News Washington Bureau

Washington -- General Motors Corp. has agreed to reverse its decision to close 41 of the 2,100 dealerships it plans to shutter in bankruptcy, as pressure mounts on automakers to do more for their dealers.

A group of influential members of Congress, including House Majority Leader Steny Hoyer, D-Md., introduced a bill this week to try to force GM and Chrysler Group LLC to keep dealers open.

On Tuesday, a federal bankruptcy judge agreed to allow Chrysler to close about 25 percent of its nearly 3,200 dealerships -- or 789. Hoyer acknowledged that it is unclear if Congress would be able to force the reopening of those dealerships.

As of Tuesday, GM had reversed itself in 15 cases. It has now heard hundreds of appeals from closing dealers, and changed its position on 41. GM expects to have between 3,500 and 3,800 dealers by the end of 2010, compared to about 6,200 today.

On Friday, a House Energy and Commerce subcommittee chaired by Rep. Bart Stupak, D-Menominee, will hold a hearing on the closing dealerships and will hear from GM CEO Fritz Henderson and Chrysler President James Press.

GM has done far more for dealers than Chrysler, which had no appeal process, reversed no closing decisions, gave dealers no money and ordered them to close in 26 days. It did agree to give dealers until June 15 to transfer their unsold inventory to other dealers at basically the same price they paid.

The bill, called the Automobile Dealer Economic Rights Restoration Act of 2009, would restore the economic rights of automobile dealers to protect jobs, workers and small-business owners. It has 40 House co-sponsors, including Rep. Thaddeus McCotter, R-Livonia.

Local car dealerships employ hundreds of thousands of Americans, contribute to vibrant local economies all across our country, and are key to putting the American auto industry back on top," said Rep. Chris Van Hollen, D-Md.

Hoyer said he had spoken to the White House's auto task force, and it acknowledged that the automakers will see no immediate cost savings from closings dealers.

Hoyer said Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, would consider the bill in the coming weeks. Frank is also a co-sponsor.

"This legislation says that the dealers' contracts should be honored, and any closings should be done in accordance with those contracts and state law," Hoyer said.

Sen. Bob Corker, R-Tenn., has a separate bill that would make closing dealers financially whole by forcing automakers to buy back unsold parts and inventory.

Ron Bloom, an auto adviser to President Barack Obama, said "the list of victims of a failed corporation is very wide." But he emphasized that "these are not (the government's) decision."

The National Automobile Dealers Association strongly endorsed the bill, saying the way Chrysler closed its dealers was "unconscionable."

"The truth of the matter is that closing dealerships will not make either General Motors or Chrysler more viable," NADA said in statement. "These closings are unnecessary and wrong."

dshepardson@detnews.com (202) 662-8735