- The Washington Times - Thursday, June 4, 2009

Top executives at struggling automakers General Motors Corp. and Chrysler LLC, appearing before a skeptical Senate panel Wednesday, defended their decisions to slash nearly 2,000 dealerships, arguing they had to do it to survive.

Two days after the company declared bankruptcy, GM President Frederick A. “Fritz” Henderson told senators that the current network of car dealers was established in the 1940s and 1950s, before the national interstate highway system was built, at a time when American manufacturers dominated the car and truck market. But with the rise of Asian automakers and the free fall of American automakers, the car company needs to slash costs across the board — including dealers — to become viable again, he said.

“A dealer closing is as painful as a plant closing. But we have no choice,” Mr. Henderson told senators on the Commerce, Science and Transportation Committee.

Likewise, Chrysler President James Press described closing dealerships as “an absolutely necessary part of our effort to assure the long-term viability of the new Chrysler Group.”

GM announced the second-largest industrial bankruptcy in history Monday, capping months of frenzy as the White House struggled to save the storied automaker. The latest pledge by the Obama administration to pump an additional $30 billion into the company brings the total to more than $50 billion taxpayer dollars that have been invested. In return, the government received a 60 percent stake in GM.

Chrysler filed for bankruptcy in late April, but a federal appeals court has halted its sale of the bulk of its assets to Italy’s Fiat pending an appeal by a trio of Indiana state pension and construction funds. The 2nd U.S. Circuit Court of Appeals said it would hear arguments in the case Friday afternoon in New York. Chrysler had hoped to close the sale by the end of week, pending regulatory approval.

Senators demanded answers from GM and Chrysler about their plans to shutter 1,100 and 789 dealerships, respectively, as well as their overall restructuring strategies.

“There has been double-dealing here,” said Sen. Frank R. Lautenberg, New Jersey Democrat, citing instructions from Chrysler to its dealers earlier this year to purchase an additional 78,000 cars. “It’s tough and I know you don’t like it, but whether or not you like it, the burden that you’re passing onto the dealer network is absolutely unconscionable.”

Russell Whatley, a Chrysler dealer in Mineral Wells, Texas, disputed the notion that cutting dealerships would help the struggling companies’ bottom line, contending instead that dealers such as himself represent the bulk of car manufacturers’ revenue.

“We are not a cost to Chrysler. We pay for everything we use, and we take all the risk,” said Mr. Whatley, whose grandfather opened the business in 1919. “There is no reason to close profitable dealerships.”

Mr. Whatley said he was pressured by Chrysler to order heavy inventories and now has “an eight-month supply of vehicles and only three weeks to clear them out.”

Sen. Mike Johanns criticized what he described as a lack of transparency in the Obama administration’s handling of the GM bankruptcy.

“This was supposed to save jobs, I thought,” the Nebraska Republican said of last fall’s financial bailout. “By every definition I can see, [loaning GM $30 billion] is probably the poorest investment you could possibly make.”

Mr. Johanns said he would introduce a bill Thursday to require congressional approval for any investment of taxpayer funds in a company that results in the government assuming a majority stake.

Committee Chairman John D. Rockefeller IV, West Virginia Democrat, said the turnout by committee members was the highest he had seen in 26 years on the panel.

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