The Obama Administration’s proposed bailout of General Motors and Chrysler is facing a growing chorus of criticism – and, significantly, it’s coming from both sides of the political aisle.
Nearly 40 Senators, including both Republicans and Democrats, lent their names to an amendment to an appropriations bill, sponsored by Kay Bailey Hutchison, R-TEX, that would have blocked federal aid for the two makers if steps weren’t taken to ease the pain facing close to 2,000 dealers GM and Chrysler intend to fire as part of their restructuring plans.
Earlier this month, Chrysler said it was immediately terminating 789 of its retailers, while GM sent letters to 1,100 dealers letting them know their franchise agreements wouldn’t be renewed. (Another 500 will be cut when the big automaker sells off or closes its Saab, Saturn, Hummer and Pontiac divisions.) While GM’s action will not be finalized until late in 2010, Chrysler’s termination notice was effective immediately, pending approval by the bankruptcy judge hearing its case, in New York City.
A powerful political force, dealers have been up in arms over the announcements. GM is already facing at least one lawsuit, as TheDetroitBureau.com reported yesterday. Dealers have been pressing the NY judge to reject Chrysler’s plan and have been threatening legal action of their own, though it is generally accepted that the courts, in such a bankruptcy hearing can overrule normally restrictive state franchise laws.
Feeling pressure from dealers at home, Hutchison introduced a measure that would have barred federal aid for either maker that didn’t give at least 60 days notice before forcing a dealer to close. By Thursday evening, another 37 lawmakers had signed on as co-sponsors.
Fearing the momentum could build against it, Chrysler quickly took steps to soften the opposition. In a letter to Hutchison, Chrysler Vice Chairman Jim Press assured her that the automaker would take steps to soften the impact. Among other things, Chrysler will help get unsold vehicles off dealers’ lots. GM already has said it would take similar steps to assist the dealers it is shedding.
“We agreed we both wanted something…that would give these dealers a definitive plan so they could know what they could count on,” Hutchison later said on the Senate floor. After hearing from Chrysler, she withdrew her proposed bill.
As TheDetroitBureau.com earlier reported, opposition has also been raised in the House, where perennial auto industry critic Thursday expressed his concerns, terming the auto bailout a “death star to tens of thousands of jobs.”
Despite such concerns, it appears all but certain the bailout process will keep moving ahead, and perhaps at an even faster pace than expected.
In a report, this morning, the Washington Post quoted unnamed sources claiming GM will declare bankruptcy as early as next week. The latest version of how things would play out for the stumbling giant is that GM would ultimately get another $30 billion in federal loans to drive its restructuring. That would position the U.S. government as the automaker’s largest shareholder, followed by the United Auto Workers Union and then its various lenders, who will be trading in the vast majority of their debt for equity.