July 8, 2009

Committee backs plan to save auto dealers

The U.S. House Appropriations Committee agreed to a measure that would force General Motors Corp. and Chrysler LLC to keep auto dealerships open.

The automakers have attempted to sever connections with about 3,000 auto dealers in their bankruptcy proceedings. GM has plans to cancel contracts with nearly 1,400 dealerships, while Chrysler closed 789 dealerships last week as part of its restructuring plans.

The measure, which would overturn the closures, was approved as an amendment to the Financial Services spending bill, The Detroit News reported Wednesday.

A separate House proposal that would force the automakers to maintain their full contingent of dealerships has 202 co-sponsors, the newspaper said.

I don't think Chrysler or GM has been able to demonstrate there is a savings associated with fewer dealers, since the dealers themselves bear the costs of operating their dealerships with little help from the manufacturers, said Rep. Steven LaTourette, R-Ohio.

The Obama administration has backed the automakers' initiative to pare down on retail outlets. We've been very clear that companies needed to be run commercially, rather than politically, said White House economic adviser Lawrence Summers.