Congress wants to give shuttered car dealers 2nd chance

McClatchy NewspapersDecember 11, 2009 

WASHINGTON — Congress wants to offer another chance to car dealers who lost their businesses when Chrysler and General Motors went bankrupt and took billion-dollar bailouts.

Lawmakers are expected to approve a plan before year's end to re-evaluate the reasons that the auto giants shut down certain dealerships, even those that were profitable.

The 789 dealers that Chrysler singled out for shutdowns, however, are already gone. For them, it's probably too late.

More than 1,350 GM dealers that got the heave-ho have months yet, however. Don Kahan, the owner of a Lee's Summit, Mo., Chevrolet dealership, said the bill offered a timeout to allow others and him to "go to arbitration and present our case."

Even before the eventual bankruptcy of two of the "Big Three" U.S. carmakers, industry analysts were saying that too many dealerships were inefficient and a major financial drag. Even Ford, which has been the healthiest of the Big Three, had been cutting salesrooms to come down to the levels of foreign auto companies such as Toyota and Honda.

The carmakers' decisions, however, still came as a shock, when local concerns that the same families had operated for generations were ordered shuttered. Many were anchors in small towns that provided jobs, tax revenue and a civic glue, especially in rural areas.

"There was a total, absolute disconnect about how these terminations would affect people out here in the heartland," said Don McNeely, the president of the Kansas Automobile Dealers Association.

Many dealers said they were "dumbfounded" by letters from the car companies telling them that their franchises wouldn't be renewed.

Kahan's Chevrolet sign is supposed to come down next October, after 45 years in the business. He said that he'd recently spent $1 million to update his business, and, when GM asked dealers to help out, bought its stock.

"They came out and gave us all kind of 'atta boys,' " Kahan said. "We've always done whatever they asked us to. We're a profitable dealership."

GM spokesman Greg Martin said the company intended to work "constructively" with Congress and the dealers to resolve their concerns in a way that was fair to everyone.

He said that GM's bankruptcy and restructuring "was painful, but it was necessary to ensure that the company had a viable future. You can expect the emotion that was associated with the tough business decisions that the company had to make."

A Chrysler spokesman couldn't be reached for comment.

Under the bill, a dealer could request an independent arbitrator to review the termination, who'd take into account the "economic interest" of the dealer, the carmaker and the public, as well as the demographics of the local market.

The criteria would include a four-year look at a dealer's books instead of the shorter window that dealers and their supporters claimed the carmakers used to justify the closures.

Critics said the original criteria didn't allow for a complete picture of the businesses.

"This provides a fair, transparent, open, independent process for them to make their case," said Republican Sen. Kit Bond of Missouri, a co-sponsor of the bill. "Too many solid, profitable, community-oriented organizations with strong employment bases were just wiped out for no reason at all."

Dealers were guarded in their optimism about the bill. There are no assurances that a second look at the reasons for the closures would turn out differently, nor is it a total do-over. "I can't just put it back in place," said Phil Brown, the president of Bud Brown Automotive in Overland Park, Kan.

Until last June, his dealership had been known as Bud Brown Chrysler, a family business for three generations.

The dealer shutdowns were a product of the government's $82 billion bailout of the two ailing carmakers. Both had declared bankruptcy.

"We ... took steps to prevent the rapid dissolution of the American auto industry, which faced a crisis partly of its own making, to prevent the loss of hundreds of thousands of jobs during an already fragile time," President Barack Obama said in a speech this week on the economy. "These were not decisions that were popular or satisfying; these were decisions that were necessary."

McNeely said that a lot of the dealerships on the shutdown list were in rural areas. Besides the immediate economic impact, customers will be greatly "inconvenienced," he said, which could boomerang on the car companies if fed-up customers switch brands.

Don Thomas, who's run a profitable Chevy salesroom on U.S. 63 in Moberly, Mo., for more than three decades, said that if he closed next year as expected, the nearest GM dealer would be 30 miles away in Columbia. The next closest is in Kirksville, 65 miles away.

Car owners, well as officials and merchants from towns hit by the closings, have pelted the automakers and Congress with angry letters.

"Small businesses are the backbone of America," Steve Obermann, the president of a Cape Girardeau, Mo., cement company, recently wrote to Bond. "Small businesses employ local people who in turn patronize other local businesses. ... Most people would rather buy locally from someone they know and trust than travel hundreds of miles away to deal with someone they do not know."

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