Article By Chris Miller | Posted on 2009-06-12 19:35:45
In an effort to save Hudson Valley auto dealerships and the jobs they supply to the region, Rep. John Hall (D-Dover, NY-19) signed on as an original co-sponsor of the bipartisan Automobile Dealer Economic Restoration Act (H.R. 2743) June 9.
The legislation would restore the economic rights of automobile dealers in order to protect jobs, workers, and small business owners by requiring General motors (GM) and Chrysler to continue to honor their franchise agreements with their respected auto dealers.
“To be closed down by the parent corporation without any criteria doesn’t make any sense,” Hall told HVBJ. “We have yet to hear what the criteria were for either company.”
Both, GM and Chrysler notified dealers that their franchise relationship would come to a premature close, almost effective immediately. GM’s plan to shut down 2,600 dealerships by 2010’s end and Chrysler’s intent to eliminate 789 will leave dealers with millions of dollars invested in car, truck, and SUV stock with no options for consolidation and little leverage for liquidation.
In addition to the thousands of jobs that the dealerships bring to the Hudson Valley, little league sponsorships, millions of advertising dollars, philanthropy, and spin-off business from the dealerships are also at stake.
“Each auto dealership is a vital member of our community here in the Hudson Valley. Shutting them down will create a detrimental ripple effect throughout our local economy,” Hall said.
In a letter to President Barack Obama on June 8, Hall, House Majority Leader Steny Hoyer, and 100 other representatives urged Obama to ask GM and Chrysler to delay final action on proposed closures pending further review. The bipartisan effort asked for the reconsideration of the decision to consolidate dealerships and the process by which the two automakers selected which dealerships would be closed down.
“It’s important to remember that, both, Chrysler and GM came to the previous administration and then came to the Obama administration this year, again, and asked for a bridge loan and said they were going under without government help,” explained Hall. “We want to make sure it’s the right type of help, whether it’s done by executive order which is always possible, or whether it’s done by legislation.”
Five Chrysler dealerships in Hall’s district would be affected with the dealership closings, as well as many others throughout the Hudson Valley. According to Hall, at least one GM dealership has been put on the chopping block already.
Supporters of the Automobile dealer Economic Restoration Act are concerned that the two car manufacturers are closing profitable dealerships to circumvent current contracts that could, otherwise, require expensive buy-outs under normal conditions, just as GM had previously experienced with the elimination of their Oldsmobile division. GM decided to shut down America’s oldest car brand in 2000 to the cost of thousands of jobs and a one-time lump of $2.5 billion.
The co-sponsors of H.R. 2743 are also concerned of allegations that claim dealers are being targeted with closures for previously standing up for their rights against the manufacturers. Members of Congress believe that the forced closures of profitable dealerships needs to be scrutinized by the White House’s Task force to prevent additional future financial loses to GM and Chrysler and job cuts across the U.S.
“Dealerships that are profitable should be allowed to stay open and deal with their situation to survive or go under by market forces as opposed to be closed arbitrarily.”
Hall noted that the two automakers’ dealership closings would put over 100,000 jobs at risk at a time when jobs are needed. In consideration of GM’s and Chrysler’s future, the 19th district representative believes dealership cuts will make it very difficult for the automakers to regain marketshare.
He stated that due to the cuts, consumers would have to drive further to get product and to get their vehicle serviced. He added that the cuts would also interfere with the automakers’ power to advertise, stating that currently it is a split between the dealer and the parent company with co-op advertising.
H.R. 2743 sets to accomplish to preserve the dealers’ rights under state law, requiring GM and Chrysler to restore franchise agreements that were in effect before the bankruptcies.
“It’s common in the law for the new buyer to have to honor previously executed contracts,” said Hall.
Chrysler seems to be taking an immediate approach to the dealership closings, notifying franchise owners with little or no notice. GM is giving a majority of the franchises notice that informs them of their close down in the fall, in order to give the dealership time to wind down their operations.
Dealers pay up front for the stock that’s on their showroom floor and they make most of their money on service and used care sales. According to Hall, all the dealers that he spoke with in his district are profitable.
Many dealers believe that when Chrysler, Fiat or GM come out with their new line of cars, which are hoped to be highly fuel efficient, stylish, and popular, that they’d have a better chance of regaining their former marketshare if they had a strong dealer network.
Hall noted that the automakers’ capability to regain marketshare also has ramifications for the taxpayers stake in GM and Chrysler.
“We, through our treasury department, have lent a substantial amount of money to these companies and for them to recover marketshare is something for which we ought to make a point,” he said. “We have a better chance of the taxpayer being paid back if we leave the profitable dealers in business.”
Rep. Maurice Hinchey (D-22nd District), co-sponsor of the Automobile Dealer Economic Restoration Act, said that dealerships play an important economic role in New York and throughout the U.S. and that it is important for GM and Chrysler franchises to remain open, especially, during these tough economic times.
As of 4 P.M. June 10, Hall said that he was two minutes away from being a part of a meeting with House Speaker Nancy Pelosi to discuss a variety of concerns, one being the shutdown of Chrysler and GM dealerships. Hall assured that the Obama administration is talking to the leadership of the House and the senate and noted that Pelosi speaks with the White House on a daily basis.
All current co-sponsors of H.R. 2743 are in the process of trying to get additional signature support from the remaining representatives. If two-thirds co-sponsorship is achieved, H.R. 2743 it automatically receives a vote on the House floor under suspension rules, which allows it to bypass the House’s committee.
“The fact that our Majority Leader Hoyer is one of the co-sponsors is a very good sign because he makes up the schedule and he also talks with the White House quite frequently,” explained Hall.
