2% of To-Be-Closed GM Dealers Saved from Closing
By: Donna Ray Chmura. This was posted Tuesday, June 16th, 2009
According to the Detroit News, General Motors reversed the closing of 41 of the 2,100 dealerships originally targeted to be closed as part of GM’s bankruptcy and restructuring.
GM has listened to appeals from hundreds of dealers, and has allowed 41 so far to remain open. This is in stark contrast to Chrysler, which received Bankruptcy Court permission to close 25% or 789 dealerships although it had no dispute or appeals process of any sort.
A group of influential members of Congress, including House Majority Leader Steny Hoyer, D-Md., introduced a bill last week to try to force GM and Chrysler Group LLC to keep dealers open. 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, although it is unclear whether Congress has any power to change the Chrysler closings.
A House Energy and Commerce subcommittee chaired by Rep. Bart Stupak, D-Menominee, has held hearings on the closing dealerships and heard from GM CEO Fritz Henderson and Chrysler President James Press.
It has been reported that Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, is considering a similar bill in the coming weeks. 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.
The problem with this legislation is that federal bankruptcy law trumps state contract law by allowing existing contracts to be “rejected” by the Debtor, with Court approval. This is exactly what happened to the Chrysler dealers. Chrysler filed a motion to close certain dealers because it would strengthen Chrysler’s economic position, testimony was presented, and the judge ruled to grant the motion.
Tags: closing dealerships, General Motors, GM, GM Bankruptcy