Lawmakers scramble to help auto dealers and consumers

Another challenge for used automobile sales.
Another challenge for used automobile sales. Ricky Wong / MCT

WASHINGTON — Responding to consumers and car dealers upset by the upheavals in the American auto industry, lawmakers in Congress moved quickly Tuesday to provide relief from dealer closings and sluggish sales.

By a 298 to 119 vote, the House of Representatives passed a measure to give car buyers up to $4,500 for their old cars, as long as they buy a new one.

The Senate Banking Committee also scheduled a hearing Wednesday to hear from top Obama administration auto officials. They're expected to be asked about concerns that General Motors and Chrysler, bankrupt companies that are getting billions of dollars in federal aid, have an unfair advantage over competitors that aren't receiving government help.

House leaders from both parties are also protesting auto company decisions to close dealerships. Chrysler plans to close 789 dealerships by mid-June, or about a quarter of its total, after giving owners about a month's notice. GM plans to close about 1,100 dealerships by October 2010.

Rep. Steny Hoyer, D-Md., the House majority leader, complained that it was "irrational to close down dealerships which average 53 employees per dealership, and could quite possibly increase unemployment by 100,000 people if, in fact, it does not serve the economic interests of the manufacturers."

Hoyer and other House leaders seemed almost defiant. When the White House announced the General Motors bankruptcy last week, it stressed that it wouldn't get involved in the day-to-day operations of the business.

After hearing from local dealers around the nation, though, Congress quickly got involved in trying to keep them open, or at least to help them dispose of their inventories. Chrysler officials said Tuesday that they'd help closing dealerships unload all inventory.

Congressional leaders were still annoyed.

"In this instance, the White House nor the manufacturers have, in my opinion, given a reason why this accomplishes that objective," Hoyer said. "In light of that, it seems to be simply a way to adversely affect dealerships around the country, many of whom — I don't want to say all — but many, many of whom are profitable, well-managed, effective dealerships."

The outrage was bipartisan.

The Chrysler dealership plan "has been haphazard and has generated confusion among those affected," said Rep. Darrell Issa, R-Calif., the top Republican on the House Oversight and Government Reform Committee.

"By refusing to explain the decision to close dealerships and refusing to reveal the formula used to identify non-viable dealerships," he told GM and Chrysler officials in a letter Tuesday, "you and the Task Force have left dealers wondering how and why they were selected to have their assets liquidated."

Democrats are pushing legislation that would require General Motors and Chrysler to reinstate franchise agreements in effect before each company's bankruptcies, if an auto dealer made such a request. The bill also would give the dealerships more tools to challenge any closures.

The "cash for clunkers" legislation, a separate bill, arguably would give dealers more reason to stay open. The House-approved measure would give consumers up to $4,500 to trade in gas-guzzlers for more fuel-efficient vehicles.

Consumers could get the full amount if their new cars got 10 miles per gallon more than their old ones. They'd get lower amounts for smaller mpg differences.

Lawmakers want to add $1 billion to an emergency war spending program to get the "cars for clunkers" program going immediately. The total estimated cost is about $4 billion, and the rest of the funding would be made available in separate legislation later this year.

"These times call for bold action. This bill is about far more than just cars. It's about people, the millions of people in this nation who depend on the strength of the auto industry for their livelihood," said Rep. Betty Sutton, D-Ohio, the bill's chief sponsor.

However, Rep. Eric Cantor, R-Va., the House minority whip, argued that the bill didn't go far enough, and wanted the measure extended to used cars. "Even after a generous credit, a new car for many Americans is still out of reach," he said.

The Senate hearing is likely to touch on all these subjects, as well as on the broader issue of "whether government assistance to certain companies is unfairly disadvantaging other domestic competitors and their customers," according to Banking Committee spokeswoman Justine Sessions.

Sen. Carl Levin, D-Mich., said that shouldn't be an issue.

"Every automobile manufacturer in the world is supporting their auto industries. Period," he said.

"They do it in different ways. Japan, apparently, members of the autoworkers, many of them are right on the government payroll. How it's done varies from country to country, but that's what's going on."

Sen. Christopher Dodd, D-Conn., the chairman of the Banking Committee, said he'd ask five basic questions:

"How are taxpayer dollars being used to restructure the auto industry? Why is the government taking such large ownership stakes in these companies? Is the government doing everything it can to protect American jobs? What assistance is being provided to communities devastated by auto plant and dealer closings? And when can we expect the American taxpayers to receive a return on their investment?"


Cash for clunkers fact sheet


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