GM, Chrysler executives defend dealership closings

GM, Chrysler executives defend dealership closings
GM & Chrysler execs defended closings of hundreds of dealerships as House lawmakers questioned whether decisions would save money or help the troubled companies rebound. "Many dealers and the communities they serve frankly feel blind-sided," said Rep. Greg Walden. GM CEO Fritz Henderson said to a House panel the dealer cuts were quite painful but necessary to preserve over 200,000 jobs at GM's remaining dealers. "In essence, this is our last chance," he said. The committee released a GM document that provided a state-by-state list of 1,323 dealerships the automaker plans to wind down. PA had the most with 90, followed by OH with 79, IL with 66 & CA with 65. NY had 60 and MI, where GM's headquarters is based, had 58 outgoing dealerships. AL was the only state spared. Chrysler Deputy CEO Jim Press said cuts were "the most difficult business action" of his career but were among the shared sacrifices by the UAW union, bondholders and others needed to save the company. "Going through bankruptcy wasn't our choice," he said. House members expressed dismay at tclosing of 789 Chrysler dealerships & plans by GM to shutter 1,350 by the end of next year. They said many rural communities would be left without dealerships while thousands of jobs would be lost without any firm guarantee GM & Chrysler, which have received billions in federal aid, would benefit long-term. "When it comes time to purchase a new vehicle, many new constituents will abandon GM or Chrysler & go to whichever brand is still locally sold by a person they trust in their community," said Rep. Bart Stupak, subcommittee's chairman. "How does it help to close profitable dealerships?" asked Rep. Diana DeGette, who said 14 profitable Chrysler dealerships were closing in her home state. Dealers said the of their stores risked putting 100,000 jobs at risk & charged them companies with failing to be transparent about how they reached their decisions. Many dealers said stores performed well despite the economic downturn. "We have been GM to our community," said Bob Thomas, owner of Bob Thomas Chevrolet-Cadillac in Bend, OR. "Now it is a dark time when GM must abandon our town, our region and us." Frank Blankenbecker, dealer-principal of Carlisle Chevrolet-Cadillac in Waxahachie, TX, said he learned in May his 83-year-old dealership would lose its Jeep store & his GM franchise agreement would not be extended. Dan Kiekenapp, GM of Tacoma, WA Dodge, said he was puzzled when he received his termination notice from Chrysler because he had net sales exceeding $1.7M last year & was the top Dodge dealer in western WA last April. "Webeen reduced to being a used car lot & a neighborhood automobile repair facility," he said. The auto exes said their companies were slowed by too many dealers, with many representing the same company often competing against each other for sales. Dealerships date to the 1940s & '50s, they said, when motorists lived farther apart & Detroit automakers dominated the U.S. market. Henderson & Press said after losing customers & market share to foreign competitors, their companies needed to scale back all operations to become leaner & return to profitability. Press said the 789 discontinued dealers met only a portion of the minimum sales responsibility & represented 55,000 units of loss sales & $1.5B in lost revenue in 2008. Henderson said the dealership reductions would allow the company to reduce many dealer support programs like incentives & help to dealers with their inventory resulting in annual savings of more than $2B a year. In total, GM is expected to cut its dealer body by 2,500 thru shuttering of dealerships, anticipated attrition & shedding of its Saturn, Hummer, Pontiac & Saab lines. Henderson said the committee 856 dealers appealed GM's decision to sever ties. As of now, GM reversed itself on 45 of them, he said. Italian automaker Fiat Group closed a deal to become new owner of most of Chrysler's assets, saving it from liquidation. The new company will be called Chrysler Group. GM filed for Chapter 11 protection June 1 & the company hopes to emerge from bankruptcy as a new company in 60-90 days.