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.
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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Reader Comments (Page 1 of 1)
12-15-2009 @ 9:49PM
Oblaw said...
Why must the motives for closing dealerships be such a simple proposition? Certainly the auto companies believe they will make more money by closing dealerships but the logic is not unassailable. The older and smaller dealerships often have contracts with the auto companies that are not as lucrative as the more recent contracts. The closure of these dealerships results in an opportunity to jettison the older contracts and then sell newer contracts with more attractive terms. Win--- Win, unless you faithfully sold cars for one of these auto companies for the last, say, 50 years.
12-15-2009 @ 11:17PM
dan detroit said...
The so called "terms" of all dealer's contracts are exactly the same. There is no difference between the new and the old. Oblaw is simply wrong in his assertion.
12-16-2009 @ 4:12AM
Barry said...
It seems to me that no one is asking how those dealerships that were closed cost the automobile companies profits. It seems logical to me that the more places selling my products, the more product I will sell and thus the assertion that having those dealerships caused losses to the companies would not be plausable.
12-16-2009 @ 9:21AM
xpt2wndj said...
Socialism Sucks!
12-19-2009 @ 5:12AM
Rawleighf said...
Obviouly, in my opinion, some entity or a group wielded together by a greedy aim to profit by transferring this vital industry elsewhere. Who do you suppose that is, doing that?, while our minds have been on something else.
We have had it, Corruption is now king with no honest mechanization set up to protect the people or rectify the situation. Very similar to the early 30s of the last century!