Late yesterday the U.S. House of Representatives passed spending bill that included a section, H.R. 2743, intended to reverse the closing of almost 3,000 dealers, which is key to the restructuring plans of Chrysler Group and General Motors Company. The White House had issued a statement earlier that strongly opposed the measure.
The core issue being avoided is that new vehicle sales have declined 40% since 2007, and are not forecast to rebound from the current 10 million annual rate anytime soon. The U.S. dealer network now being pared was built to service a 16 million unit per year industry. Too many dealers are chasing too few sales.
While individual dealers and the politically powerful National Association of Auto Dealers oppose the closings, no concrete plan to keep the dealers open without forcing the recovering auto companies to incur huge costs has emerged.
House Majority Leader Steny Hoyer, a Maryland democrat, spearheaded the revolt after he felt he was brushed off by the President’s Auto Task Force.
“They could not tell me why shutting down any of those dealers” would save money for the carmakers,” Representative Hoyer said in a press conference before the bill passed.
In detailed testimony in June, Chrysler and General Motors executives explained the rationale for the closings, what they were doing to help disenfranchised dealers, and even outlined the substantial costs involved to keep the dealers open.