Automakers Defend Plans to Trim Dealerships
By BERNIE BECKER
Executives at General Motors and Chrysler defended the methods they used to whittle down dealerships at a Senate hearing on Wednesday, calling it a painful but necessary part of creating leaner, more competitive companies.
The chief executive of General Motors, Fritz Henderson, and the vice chairman of Chrysler, James E. Press, said dealerships that sold a small number of vehicles weighed down their companies. A more streamlined corps of dealers, they said, was vital for survival.
“Does my heart go out to the dealers who will not be part of the new company? Absolutely,” Mr. Press said in his prepared testimony. “But we’ve had to make many hard choices to create a viable business and preserve jobs for tens of thousands of people.”
But Senator John D. Rockefeller IV, the chairman of the Senate Commerce committee, criticized both executives in his prepared testimony for “somehow implying that the dealers themselves are responsible for the companies’ problems.”
“Let me be very clear,” Mr. Rockefeller, Democrat of West Virginia, said. “I don’t believe that companies should be allowed to take taxpayer funds for a bailout and then leave local dealers and their customers to fend for themselves with no real notice and no real help.”
Chrysler is expected to close about 800 dealerships by June 9, according to the testimony. General Motors hopes to reduce its dealerships to about 3,500 by the end of next year from around 6,000 currently.
The G.M. dealers marked for closing will stay open as late as October 2010, when their current agreements with G.M. expire. In general, auto dealerships are independent businesses and are not owned by manufacturers like Chrysler or G.M.
The executives noted in their testimony that government entities, like the Treasury Department and federal bankruptcy courts, had urged them to make tough decisions about which dealerships to close and that those decisions were made as objectively as possible.
The executives said that a variety of factors, including a dealerships’ location, the quality of its facility and its profitability, were used to determine which ones would remain.
“Underperforming dealers,” as the two executives called them, cost sales, reduced customer satisfaction and fractured advertising messages. Mr. Henderson also notedthat many dealerships have been around since the 1940s or 1950s, setting up shop when American automakers had a stranglehold on the market. Now, with the influx of foreign dealerships, many of those dealers are in small towns or rural areas, not the suburban and urban population centers where most people live.
For their part, two small-town dealers disputed that their dealerships were a drag on the auto companies.
Peter Lopez, who owns Chrysler and G.M. dealerships in Spencer, W.Va., and Russell Whatley, who has a Chrysler dealership in Mineral Wells, Tex., said they paid the auto companies for vehicles and parts, as well as other fixed costs, like the right to hang the manufacturer’s sign. Mr. Lopez saidhis dealerships produced roughly 15 percent of his town’s tax revenue and that he even bought additional Chrysler vehicles earlier this year, at the company’s insistence, to help it through the recent downturn. And Mr. Whatley said that he grossed almost $450,000 a month.
But both have been told their Chrysler dealerships will be closed. Mr. Lopez’s G.M. franchise will close next year.
“To be arbitrarily closed, with no compensation, is wasteful and devastating,” Mr. Whatley said.
source: The New York Times
