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House breaks with Obama, sides with car dealers

- The Washington Times - Friday, July 17, 2009

The House broke with the Obama administration Thursday over a key part of the auto industry restructuring, pressing General Motors and Chrysler to restore dealerships shuttered by the car companies' bankruptcies.

The House approved the car dealer measure Thursday as part of a spending bill. It would force General Motors Co. and Chrysler Group LLC to restore franchise agreements with dealers as a condition of partial government ownership.

Car dealers have lobbied lawmakers to support the bill, arguing that the government and the automakers have trampled state franchise laws and knocked out hundreds of dealerships with little warning. They warn that up to 200,000 workers could lose their jobs.

"An economic recovery will not be possible if we continue to throw people out of work," said Rep. Steve LaTourette, Ohio Republican.

GM is reducing its 6,000-dealer network by more than 2,000 by not renewing franchise agreements next year and winding down stores with outgoing brands such as Pontiac, Saturn, Saab and Hummer. Chrysler cut 789 of its dealers as part of its restructuring plan, reducing its dealer count to about 2,400.

The dealership reductions were part of the GM and Chrysler bankruptcy agreements. Chrysler emerged from bankruptcy in June and GM exited bankruptcy on July 10, helped by billions in federal aid. The government now owns nearly 61 percent of GM and 8 percent of Chrysler.

The White House said Wednesday it strongly opposes the measure, arguing it would "set a dangerous precedent, potentially raising legal concerns, to intervene in a closed judicial bankruptcy proceeding on behalf of one particular group."

GM and Chrysler have fought the legislation, saying it will slow down their turnaround plans and hurt their efforts to create a more profitable dealer network amid sluggish sales. Peter Grady, a Chrysler vice president, said the move by Congress "flies in the face" of a declining U.S. vehicle market. "There are simply too many dealers for not enough sales," Mr. Grady said.

Rep. John D. Dingell, Michigan Democrat and an auto industry champion, said Congress was "playing with fire."

"If the auto industry goes down because we have taken sides in a quarrel between the auto industry and the dealers, we will have destroyed not only the dealers that complain but all of the other dealers," Mr. Dingell said.

House Appropriations Committee Chairman David R. Obey, Wisconsin Democrat, countered that it would "get the auto dealers and the auto companies to sit down and work out a better appeals process so you don't have some significantly profitable auto dealers at the local level being unnecessarily put out of business."

The measure faced an uncertain future.

Senate Majority Leader Harry Reid of Nevada said earlier in the week that the issue was not atop his agenda, setting up a potential roadblock. Reid spokesman Jim Manley noted Thursday that Sen. Charles E. Grassley, a Republican from Iowa, has introduced a similar measure and said Mr. Reid would monitor the legislation's progress.