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Wednesday, 08 July 2009 15:24

Terminated Dealerships Bill Passes House Appropriations Committee

Rep. Steven LaTourette, R-Ohio, has sponsored a dealer amendment bill that would restore U.S. dealerships to their status before the GM and Chrysler bankruptcies. The measure would force Chrysler and GM to renew franchise agreements that were killed during bankruptcy proceedings or terminated by automakers. The amendment passed the House Appropriations Committee late July 7.

Appropriations Chairman David Obey (D-WI) pushed for passage of the LaTourette amendment, and said he would protect the amendment when the Financial Services appropriations or spending bill goes before the Rules Committee. If passed the legislation would overrule bankruptcy law, judicial decisions, and theories of capitalism often touted by anti-regulatory politicians.


LaTourette said the bankruptcy courts have eviscerated state franchise laws that protect automobile dealer franchise agreements, citing the 789 Chrysler dealers nationwide that were targeted for closure through bankruptcy and given weeks to unload their inventory at emergency-sale prices.  GM, meanwhile, wants to shed dealerships through wind-down agreements, where the dealers have about 16 months to sell their inventory and shutter their dealerships. GM plans to end franchise agreements with about 40% of its 6,000 dealerships. Chrysler has terminated 25% of its dealerships.

LaTourette said his amendment requires that franchise agreements be restored for automakers that are at least partially owned by the federal government.

“I don’t think Chrysler or GM has been able to demonstrate there is a savings associated with fewer dealers, since the dealers themselves bear the costs of operating their dealerships with little help from the manufacturers,” LaTourette said. “I think the closing of these dealerships was punitive and secretive, and it’s the most un-American thing for the government to help force you out of business and deprive you of the American dream.”

"Car companies have used bankruptcy to run roughshod over state bankruptcy laws," LaTourette said, observing that state laws are more stringent than federal Chapter 11 provisions.

A GM spokesman, Greg Martin, said "Such legislation, if passed, would put our long-term viability at risk… We've taken extraordinary efforts, from product planning to manufacturing to labor agreements, to reinvent the company, and we need a dealer network to match. This legislation seeks to overturn the Bankruptcy Court's decision after the fact to protect a single stakeholder among so many that have been called to sacrifice during our restructuring."

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