Both Chrysler and GM terminated dealerships during their bankruptcies, allowing the company to avoid state-mandated franchise laws. Last night, a bill cleared the House Appropriations Committee that could bring terminated dealerships back in business.
The bill is a provision of the 2010 Financial Services spending bill, and would require Chrysler and GM to work through state courts to terminate dealerships instead of the U.S. Bankruptcy Court. Representative Steven LaTourette, R-Ohio, sponsored the dealer amendment. If enacted, federal funding to the two American automakers could be cut off if they don’t abide by the provisions in the bill.
“Car companies have used bankruptcy to run roughshod over state bankruptcy laws,” said LaTourette in an interview.
Normally, the companies would have to work with a state’s more protective franchise laws to terminate dealerships. Both companies took advantage of the Chapter 11 bankruptcy provisions that allowed them to quickly shed dealerships.
GM opposes the House bill. “Such legislation, if passed, would put our long-term viability at risk,” said GM spokesman Greg Martin in an e-mail to Automotive News.
“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.”
Chrysler has yet to publicly discuss the legislation.
Currently, GM plans to terminate around 2400 dealerships out of its 6000. Chrysler has terminated 789 dealerships, approximately 25 percent of its franchises.
LaTourette said the spending bill, with the dealer amendment, is supposed to go to the House floor next Wednesday. However, policy changes like the dealer provision are not supposed to be included in spending bills, so lawmakers may try to excise it.
Source: Automotive News