Why are GM and Chrysler shutting down dealerships for no reason?

In an almost unprecedented case of federal bureaucratic meddling in what should be business decisions, GM and Chrysler have agreed to set up an "appeals" process to give dumped dealerships a chance to plead their case for retaining their franchises.

GM and Chrysler came under intense pressure from Congress when they announced plans to close dealerships, largely because the National Automobile Dealers Association is one of the most powerful lobbying groups in the country.

"Profitable dealerships that were closed for possibly unfair reasons deserve the opportunity to hear why they were closed and discuss the merits of reopening with an independent arbitrator who can make a binding decision," said House Majority Leader Steny Hoyer, D-Md, who is also an expert on the auto industry and business management (OK, no he isn't).

Hoyer has received $2,500 from the NADA during the current election cycle.

"Closed unfairly"? Why would GM and Chrysler do a horrible thing like that? There are three possibilities, two of which are exceedingly remote and one of which is likely, and I'll leave it to you to decide which is which:
  • GM and Chrysler are just plain mean. For no real reason, they want to shut down dealerships, eliminate people's jobs, and wreak havoc on family businesses. There's no profit motive; they're just cruel.
  • There's some sort of evil conspiracy where some third party we don't know has a vested interest in destroying car dealers, and has bribed GM and Chrysler management into participating in this evil scheme.
  • After a careful analysis of available information, GM and Chrysler brass decided that closing down certain dealers would allow the company to cut costs, streamline operations and, perhaps, have a shot at returning to profitability.
According to CNNMoney, "Each company collected billions of taxpayer dollars through bailouts, and dealers are irate at the prospect of government-backed companies turning around and dropping a guillotine on small, locally owned businesses. Their lobbying prompted Congress to intervene."

The fact that taxpayers have a massive investment in GM and Chrysler is actually exactly the reason that we should not allow political pressure to save "small, locally owned businesses" to influence operations: these companies need to be run for the benefit of taxpayers as a whole, and that means doing whatever it takes to prepare them to be profitable again.

As GM looks for a permanent permanent CEO to replace the recently departed Fritz Henderson, I can't imagine that prospective candidates are going to be eager to get involved in a company where unpopular business decisions can be reversed and subject to arbitration panels because a disgruntled former car dealer called his Congressman.

On a multitude of levels, this is a bad precedent and if the turnaround efforts at GM and Chrysler fail, we'll look back at government meddling like this as an important cog in the US auto industry's downfall.
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