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GM, Chrysler: Slashing Dealerships Is Necessary

STEVE INSKEEP, Host:

As Chrysler wraps up a bankruptcy and General Motors begins its, both companies are cutting ties with local car dealerships, many of them anyway. Both automakers say they need to trim their franchise networks. But in a Senate hearing yesterday, lawmakers asked if the companies are abandoning loyal dealers and customers. Of course you have to cut costs, but maybe not in my backyard. NPR's Audie Cornish reports.

AUDIE CORNISH: Meet Peter Lopez, a West Virginia auto dealer who was a star witness of the Senate Commerce Committee hearing.

PETER LOPEZ: Our dealerships service six county areas in West Virginia and I am the face of Chrysler and General Motors to my community and my customers.

CORNISH: Russell Whatley, a Chrysler dealer from Mineral Wells, Texas is facing a similar fate.

RUSSELL WHATLEY: Every dealer's biggest fear is on June the 9th we lose all options on these cars. We can no longer sell them, we can no longer dealer trade them, they have no incentives, no rebates, no warranties, they're just planter boxes.

CORNISH: June 9th is Chrysler's deadline to close 789 of its dealerships. Chrysler president James Press says in order to make the company viable for its pending sale to Italian automaker Fiat, they had no choice but to consolidate the stand-alone dealerships of Jeep, Dodge, and the Chrysler brands.

JAMES PRESS: We are trying to bring all three brands under one roof, because by trying to run three separate brands in channels and dealer bodies we've gone broke. We can't do that any longer.

CORNISH: Trimming a bloated dealer network and driving up business at the remaining ones is also the goal at General Motors. GM President Fritz Henderson says that in order to survive, the company must shed more than 2500 dealers because there are too many of the franchises too close together.

FRITZ HENDERSON: Over the years, many GM dealers could not earn enough profit to renovate their facilities and retain top tier sales and service staffs. And for those who could raise capital, it made little business sense for them to invest in a market already saturated with GM dealers.

CORNISH: But lawmakers took issues with the way the companies were conducting the closures with little oversight and no real chance for appeal. Senate commerce chair Jay Rockefeller of West Virginia called the whole process unfair.

JAY ROCKEFELLER: I honestly don't believe that companies should be allowed to take taxpayer funds for a bailout and then leave it to local dealers and their customers to fend for themselves with no real plan, with no real notice, no real help. It's just plain wrong.

CORNISH: But it was not clear to lawmakers, such as South Carolina Republican Jim DeMint what, if anything at all, should be done.

JIM DEMINT: I think it's starting to hit all of us in the face what government managed economies feel like.

CORNISH: Senators asked what would happen to consumers and dealers in minority communities or in rural communities or on a particular street in their home state. They asked GM to improve their appeals process. They asked Chrysler to make good on its pledge to help canceled dealerships get rid of inventory. Missouri Democrat Claire McCaskill pointed out the limits of how far lawmakers can go.

CLAIRE MCCASKILL: I think we all have to acknowledge that these companies are broke and they're not going to succeed unless they get smaller, and we've got to figure out a way forward that's fair to the dealers, but at the same time, I don't think we can micromanage and insist they stay bigger. That's why they went broke.

CORNISH: Audie Cornish, NPR News, the Capitol. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Audie Cornish
Over two decades of journalism, Audie Cornish has become a recognized and trusted voice on the airwaves as co-host of NPR's flagship news program, All Things Considered.