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GM’s closing dealers get $600M

Thursday, July 23, 2009

GM’s closing dealers get $600M

David Shepardson / Detroit News Washington Bureau

Washington — General Motors Co. said Wednesday it will make cash payments of nearly $600 million to the more than 1,300 dealers it plans to close by the end of next year, while Chrysler Group LLC said its future could be in jeopardy if Congress reverses its dealer closings.

Mike Robinson, GM’s general counsel for North American operations, told a House Judiciary Committee’s subcommittee that GM had begun making the payments on Monday and had already paid out $150 million.

"With respect to GM dealers, we simply cannot undergo this sweeping transformation without a comparable effort to reshape our retail network — one which was largely created in the ’50s and ’60s," he told the committee.

GM had confirmed previously that it was offering wind-down payments of up to $1 million per dealer. The figure Robinson gave means GM is offering on average about $450,000 per dealer.

Chrysler closed 789 of its dealerships on June 9. It did not offer its closing dealers any wind-down payments or offer any appeal process.

"Legislation aimed at reversing some of the painful but necessary actions taken during Old Carco’s (the name of Chrysler assets left behind in bankruptcy) bankruptcy will simply take Chrysler back to the future that Old Carco faced not long ago — and this time, without the option of a purchaser for substantially all of its assets," said Louann Van Der Wiele, Chrysler’s associate general counsel. "Complete liquidation, with all of its dire consequences, could follow."

Rep. Bart Stupak, D-Menominee, said talks continue between automakers, key members of Congress and the dealers, but no deal is imminent. After weeks of press conferences and hearings, the issue may quiet down until Congress returns from its August recess in September.

Chrysler attorney Kevyn Orr added that the company has helped 439 displaced dealership workers find jobs at 239 dealers. He said the company didn’t have the money to offer any wind-down payments to dealers.

GM, by contrast, is giving its dealers until late 2010 to close and heard about 1,000 appeals. GM agreed to reverse its closing decisions in about 70 instances.

Congress is considering several bills trying to stop the closing of GM dealers and force the reopening of the Chrysler dealers. The House last week approved a spending bill that includes a provision seeking to reverse the dealer closings. A stand-alone House bill has a majority with 258 co-sponsors while a Senate version has 28 supporters.

But Sen. Majority Leader Harry Reid, D-Nev., has said he isn’t eager to bring up the bill.

Jack Fitzgerald, owner of Fitzgerald Auto Malls and co-chairman of the Committee to Restore Dealer Rights, told the House panel the closings were wrong.

"We all want the auto manufacturers to succeed, but it’s wrong to condone the abuse of bankruptcy law and the spending of taxpayer dollars to needlessly eliminate 169,000 jobs across the country," Fitzgerald said. "Ironically, the automakers’ plan undermines their own interests by shutting down the very part of the economic engine that enables them to sell their products and serve their customers."

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