Some Possible Protection for Terminated Dealers

This of note from Automotive News. One thing most people do not understand, dealers are the manufacturer's (OEM's) ONLY customers. OEM's by law cannot sell directly to consumers and all dealers pay the SAME amount to purchase a vehicle from their OEM.

Tell me how the reduction of dealers is making Chrysler or GM any additional profit?

Those who contend dealers are a cost center for the OEM's fail to acknowledge the manufacturers pass on virtually EVERY cost associated with supporting the dealer TO THE DEALER. Each month, dealers are assessed for their portion of consumer marketing, sales training, computer software and other systems support.

Dealers are reimbursed for warranty work they provide on behalf of the OEM. But does anyone think a reduction in dealers is going to lead to a reduction in warranty repairs? Of course not. And even if it did, the OEM would be hurt in the long run.

Many of the dealer terminations are nothing more than the OEM using BK law to rid themselves of dealers who do not cow-tow to their parent company's beck and call.

Neil Roland Automotive News July 8, 2009 - 2:44 pm ET WASHINGTON -- Terminated dealerships would be restored to their status before General Motors and Chrysler LLC filed for bankruptcy this spring, under legislation that passed a House committee last night. But the measure could face procedural hurdles.

A provision of the fiscal 2010 financial services spending bill would require GM and Chrysler to work through state courts rather than U.S. Bankruptcy Court if the automakers wanted to continue with the terminations, said Rep. Steven LaTourette, R-Ohio. LaTourette sponsored the dealer amendment that passed the House Appropriations Committee by voice vote last night.

He said federal funding to GM and Chrysler would be cut off if they didn't abide by the provisions of the bill."

Car companies have used bankruptcy to run roughshod over state bankruptcy laws," LaTourette said in an interview.

State laws are more protective of dealer rights than are Chapter 11 bankruptcy provisions. GM filed for Chapter 11 bankruptcy June 1 and is poised to emerge with its most profitable assets and $50 billion in government financing as early as tomorrow.

GM opposes the House bill."Such legislation, if passed, would put our long-term viability at risk," GM spokesman Greg Martin said in an e-mail. "We've taken extraordinary efforts, from product planning to manufacturing to labor agreements, to reinvent the company, and we need a dealer network to match. This legislation seeks to overturn the Bankruptcy Court's decision after the fact to protect a single stakeholder among so many that have been called to sacrifice during our restructuring."

A Chrysler spokesmen did not immediately respond to requests for comment.GM has announced plans to terminate about 2,400 of its 6,000 dealerships. Chrysler has terminated about a quarter of its dealerships -- 789.

The spending bill, with the dealer amendment, is supposed to go to the House floor next Wednesday, LaTourette said. But at that time, the amendment could be subject to lawmaker attempts to excise it. Policy changes such as the dealer provision are not supposed to be included in spending bills, LaTourette said.Some lawmakers will ask the House Rules Committee early next week to issue a rule to protect the bill from so-called "point of order" challenges that would spike the dealer provision, he said.