- The Washington Times - Saturday, June 13, 2009

The heads of the country’s bailed-out auto giants defended their sweeping dealership closings to an increasingly hostile Congress on Friday for the second time this month.

The Obama administration’s heavy hand in restructuring the U.S. auto industry has created a backlash in Congress, leaving the automakers vulnerable to government interference on multiple fronts.

General Motors Chief Executive Officer Frederick A. “Fritz” Henderson confirmed to the oversight panel of the House Energy and Commerce Committee that GM delayed the closing of a parts distribution warehouse in Massachusetts at the request of Rep. Barney Frank, a Democrat. Mr. Frank, as chairman of the House Financial Services Committee, has oversight of federal bailout funds.

Mr. Henderson has previously said that the Obama administration directed that GM bondholders be given no more than a 10 percent equity stake in the company after it emerges from bankruptcy.

On Wednesday, Ron Bloom, a member of President Obama’s auto task force, admitted to the Senate Banking Committee that the task force told GM and Chrysler their dealership cuts should be “more aggressive” than the automakers originally proposed.

Angry auto dealers, bondholders, consumer groups and free-market advocates have generated a firestorm in a heavily Democratic Congress that is usually sympathetic to Mr. Obama’s agenda. Dealers are a powerful lobbying group, donating millions of dollars to campaigns and representing hundreds of thousands of employees.

A dealer-rights bill introduced this week by a pair of Democrats, Reps. Dan Maffei of New York and Frank Kratovil Jr. of Maryland, has gained 84 bipartisan co-sponsors including two influential Maryland Democrats - House Majority Leader Steny H. Hoyer and Rep. Chris Van Hollen.

The bill would force GM and Chrysler to justify their dealer terminations through state courts, where the dealers would be protected by strong franchise laws. Both companies have taken advantage of federal bankruptcy laws to break their dealer relationships quickly.

At a Senate Commerce Committee hearing last week, Sen. Mark Warner, Virginia Democrat and former businessman, acknowledged the risk of federal “micromanagement.” But he said the government’s 60 percent stake in GM gives Congress the “right and responsibility” to probe its dealer terminations.

At Friday’s House hearing, Mr. Henderson said about 96 percent of the 1,350 GM dealers who were asked to close their businesses have agreed to do so, aiding the company’s prospects of emerging from bankruptcy within 90 days.

“All parts of GM, including the dealer network, must become smaller and more efficient to reinvent GM,” he said.

Chrysler Deputy Chief Executive Officer Jim Press told the panel that the cuts were “the most difficult business action” he’s had to make, but were among the shared sacrifices by the United Auto Workers union, bondholders and others needed to be made to save the company.

Panel members were dubious.

“When it comes time to purchase a new vehicle, many of my new constituents will abandon GM or Chrysler and go to whichever brand is still locally sold by a person they trust within their community,” said panel Chairman Rep. Bart Stupak, Michigan Democrat.

John McEleney, chairman of the National Automobile Dealers Association, urged the panel to support the dealer rights bill.

“These government-negotiated bankruptcies continue to threaten dealer rights under state motor vehicle franchise laws. These laws inject balance in the inherently unbalanced economic relationship between a dealer and the manufacturer,” he said.

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