Your automotive industry bailout probably just became a little more expensive. Automotive News [sub] reports that the House of Representatives has passed a spending bill including provisions to reinstate dealers culled during GM and Chrysler’s restructuring. The measure now moves to the Senate, where 24 co-sponsors of a similar bill should have little problem rounding up votes (although Senate Majority Leader Harry Reid tells the NYT that the bill is not at “the top of the agenda in the Senate at this time”). The problem is that President Obama has urged congress to dump the reinstatement bill, indicating that he will almost certainly veto it. Meanwhile, a non-legislative “solution” to dealer grievances is still being touted as the ideal solution. Which indicates that GM and Chrysler will have to pay off dealers, a move that would likely cost taxpayers even more money.
Chrysler VP for Network Development and Fleet Peter Grady is firing back at the House passage on its blog, arguing that
“our rationale for choosing which dealerships would not be going forward with the new company has been criticized as unfair and unfounded. That accusation is rebutted in large part by a key finding by U.S. Bankruptcy Court Judge Arthur J. Gonzalez, who wrote, ‘The Court also finds that no evidence has been presented to the Court showing that the Debtors made their individual rejection decisions irrationally, such that the rejections demonstrate bad faith or whim or caprice.’”
If Obama vetoes this bill, it will be the first thing that I will applaud him for. The dead dealers don’t need to be brought back. What’s done is done. There are far too many GM and Chrysler dealerships competing for the same sales of the same cars. In the interest of the remaining dealerships, the dead ones need to stay dead. It’s not like a dealership that was selling 5 cars a month was very profitable anyway.
News Flash: Dealers DO NOT make a large profit on SELLING new cars. The vast majority of profit being made at a dealership is made in the Service Dept.
Yes, keep the dealer cull. But, it should have a rational basis. A local guy had his Jeep franchise yanked even though he’s been a top 10% dealer for many years running. His crime? He was uppity about Chryco establishing more dealerships within 20 miles of him and he used the state franchise law to keep that from happening. Had they had their way, they would have had even more weaker dealers to get rid of.
I don’t know if this guy has any recourse other than bitching to Congress. He has a set of pretty damning communications with and internal to Chryco.
Does anyone really think that this will ever make it to the President’s desk? With the Task Force losing Rattner prior to whatever sort of plea deal he’s negotiating with the NY AG, do you think the White House is dumb enough to let this issue remain in the news for another few weeks? Unlikely.
Why not a sensible compromise that forces the factories to agree to not reopen in markets where they elected to abandon their customer base? If it’s really–really–about rightsizing distribution, you’d think that would be readily acceptable.
When pigs fly.
dealers are being closed for no good reason and it is flat wrong.
the only possible logic here is that they are out to eventually own and control distribution.
24 Senators means they have to get 27 more on-board. When said Senators have no real dog in the hunt (the dealers that weren’t culled give them money too), AND for the Dems, with a President quietly saying “please don’t mess this thing up, it’s messy enough now”. I just don’t see the votes coming together.
For the Reps, that’s easy, they’re actually local to the dealers (and all politics is local). Getting a Senator on board if you have auto plants in-state is really iffy.
Please, let’s just get it over with, Chapter 11, all dealers out of business, done, over and out…
“the only possible logic here is that they are out to eventually own and control distribution.”
Because we already know they can’t build em.
Well, if U.S. Bankruptcy Court Judge Arthur J. “Peg Boy” Gonzalez says so, it must be true.
Should have buried them in Chapter 7
They bend the law to favor the UAW and now all the other leeches want part of the action.
News Flash: Dealers DO NOT make a large profit on SELLING new cars. The vast majority of profit being made at a dealership is made in the Service Dept.
Working in a service dept. for a dealership, I am well aware of that. My question for you is, where does the average dealership get the bulk of its customers? How about from car sales? So if a sales dept. is only sending a handful of cars out the door each month, where are the profits coming from? Not to mention as technology improves, and vehicle quality improves as well, then there is less maintenance and fewer repairs. Not to mention the fact that an awful lot of people never return to the dealer for service. If a customer’s car never needs warranty work, you may never see that person once they take delivery of their car. Service departments can only do so much, and it’s up to the sales department to put enough cars on the street for the dealership to survive as a whole.
Buickman,
As a fellow salesman, I understand your passion.
Yes the company does want to control all aspects of making and selling. You can’t blame any manufacturer for that.
It is time to accept it and move on. They don’t deserve someone as commited as you.
Go independant / Join Penske you have to let it go.
I hope it doesn’t pass the Senate. Even if it does, Obama will veto it, and I don’t think the veto will be over-ridden.
The cull needs to be done. It’s only post election politics combined with pre-election donations that is making anyone think differently. GM has about 15% market share, and falling. They don’t need a dealer network appropriate to 50% market share.
“Yes, keep the dealer cull. But, it should have a rational basis.”
Well, what is rational? Any set of determining factors will be subjective. Profits? As has been said, that has more to do with parts and service than moving cars and trucks. Great customer satisfaction? It is nice, but that does not mean that the dealer is advertising, selling many cars, in a good location. Loyalty to the brand? Loyalty only lasts as long as there are enough PFDs for everyone on the sinking ship.
Anyone who has ever hired a person, fired a person, given a grade, chosen a starting lineup, or given a promotion knows that there is only so much rational basis behind these moves. All factors come into play when making “rational” choices, and I am sorry to say, but the fact that some people are not pleasant to work with is, also, a rational factor in making a choice.
I’m looking at the constitution now, trying vainly to find even a hint that this is within the authority of that body.
More, what about nail parlors, dog walking businesses, barbers, gas stations, zillions of other businesses that go defunct. Why are some businesses more equal to receive unconstitutional support than others?
“Yes, keep the dealer cull. But, it should have a rational basis.”
Well, what is rational?
For most people, “rational” means “what I think is right.”
This is what happens when you take a private enterprise and turn it into a government program. EVERYONE feels entitled to benefit, because EVERYONE pays for it.
If they want Congress to intervene on their behalf, Congress should intervene on behalf of the rest of us and preempt the self-serving state franchise laws.
Of course this will never happen. Who are some of the most powerful businessmen at the district level? Small town car dealers….
This whole thing is turning into an exercise in musical chairs, only it appears that the ordinary taxpayer is the one who is going to be left without a chair at the bailout buffet.