GM and Chrysler execs put on notice: Congress is watching

Chrysler president James Press, left, and General Motors CEO Fritz Henderson, center, and John McEleney, chairman of the National Automobile Dealers Association, testified at a hearing on GM and Chrysler dealership closures.
Chrysler president James Press, left, and General Motors CEO Fritz Henderson, center, and John McEleney, chairman of the National Automobile Dealers Association, testified at a hearing on GM and Chrysler dealership closures. Olivier Douliery/Abaca Press/MCT

WASHINGTON — Skeptical, frustrated senators Wednesday issued a warning to top executives of Chrysler and General Motors — and for that matter, the White House: Consumers, auto dealers and workers back home are increasingly nervous and angry about the bankrupt companies' operations.

As a result, lawmakers made it clear they will be watching GM and Chrysler closely and won't hesitate to get involved.

Monday, when GM formally filed for bankruptcy protection, President Barack Obama said that although the government would provide an additional $30 billion in aid, Washington would take a minimal role in the company's operation, even though the government now owns 60 percent of GM.

However, with 1,100 GM dealers likely facing closure by October 2010, and nearly 800 Chrysler dealers due to be closed next week, senators said they've heard a loud, clear message.

"Let me be very clear," said Senate Commerce Committee Chairman Jay Rockefeller, D-W.Va. "I don't believe that companies should be allowed to take taxpayer funds for a bailout and then leave local dealers and their customers to fend for themselves with no real notice and no real help. That is just plain wrong."

Sen. Kay Bailey Hutchison of Texas, the committee's top Republican, said: "It is not our place to change your decision, but it is our place to make sure everyone is treated as well as can be in this circumstance."

Executives calmly defended their actions during a tense committee hearing in a room packed with dealers from around the country.

"This is our last chance to get it right," said Fritz Henderson, GM's president and chief executive.

Senators were particularly angry with Chrysler, which gave dealers about three weeks notice that it would close a quarter of its dealerships on June 9.

Russell Whatley, a Chrysler-Jeep-Dodge dealer in Mineral Wells, Texas, lamented how "a 90-year investment is just gone and neither my family, nor my employees have any say about it."

Peter Lopez, a Spencer, W. Va., dealer, told the committee how he learned that his Chrysler business would be closed from reading The New York Times at 9 a.m. May 14. He said a Chrysler official called nine hours later.

"What gives government the right to do that?" he asked. "I'm a taxpayer, and they're getting taxpayer dollars."

Steven Rattner, the head of Obama's automotive task force, which oversees the Chrysler and GM efforts, said earlier this week that the government made "no plant decisions, no dealer decisions, no color-of-the-car decisions."

The Obama administration hopes that Chrysler will emerge from bankruptcy protection later this week, pending the outcome of a court challenge to its plan to sell a large stake of the company to Italian carmaker Fiat.

The decisions to cut dealers, said Chrysler President James Press was "gut wrenching," but he explained, "There's simply not enough business to go around."

He said that the company has an aggressive plan to help redistribute inventory to surviving dealers; Whatley argued he was getting little help. "There's a disconnect here," Hutchison responded.

Senators rarely showed sympathy for the companies.

"I don't know where your economic rationale is," said Sen. Olympia Snowe, R-Maine.

Rockefeller asked Press if he could close a Chrysler dealership in 26 days. Press responded by talking about his company's bankruptcy. Rockefeller asked that he answer the original question.

"I'd have to find a way to do it, yes I would," Press said, without giving specifics.

The exchanges capped a day when lawmakers began moving on a number of fronts to ease constituent fears about the U.S. auto industry.

Among them:

  • Republican senators want congressional approval of any government stake in companies using funds from the Troubled Assets Relief Program, the government's bailout effort. The proposal, which the Senate is expected to debate Thursday, would force Congress to approve the latest GM plan.
  • Rep. Nydia Velazquez, D-N.Y., the chairwoman of the House Small Business Committee, asked the Small Business Administration to better explain its plan to provide government-guaranteed loans to finance auto inventories. She charged that the plan so far "seems to have produced an initiative with a vague purpose and uncertain benefits."
  • The Senate Banking Committee announced that it would hold hearings on the auto industry restructuring on June 10, and is expected to examine the role of the federal auto task force.
  • The dealers' plight was uppermost on congressional minds Wednesday, largely because the issue hits close to home for almost every member.

    GM expects to close about 1,100 dealerships by the end of next year, or about 18 percent of its total, and lose hundreds more by selling off parts of the company.

    "This effort is all about GM's success over the long haul," Henderson said. "It's about repaying the taxpayers support by creating a healthy, strong and profitable GM and an equally healthy, strong and profitable dealer network."

    Chrysler has been under fire because of the short notice — it announced its plan May 14 — and because it would not buy back inventory. Press insisted the company is trying hard to help the dealers, but the industry group Wednesday pleaded for government help.

    They want financing help to enable Chrysler to buy back parts, inventory and other items from the dealers, and they want more time.

    "No manufacturer has ever imposed such onerous terms and such an onerous deadline," said John McEleney, the National Automobile Dealers Association chairman.


    National Automobile Dealers Association testimony

    Testimony of GM Chief Executive Officer Fritz Henderson

    Testimony of Chrysler President James Press


    Can a government of politicians keep politics out of GM?

    Answers to questions about GM's bankruptcy

    What's next for a humbled GM after its bankruptcy

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