Watchdog: Thousands of jobs risked by auto restructuring talks

The Obama administration’s restructuring talks with General Motors and Chrysler put tens of thousands of auto dealer jobs at risk, a top government watchdog said.

Neil Barofsky, the special inspector general over the $700 billion financial bailout, was critical of the Obama administration’s handling of the auto dealer closings as part of the bankruptcy and restructuring of both car makers.

”It is not at all clear that the greatly accelerated pace of the dealership closings during one of the most severe economic downturns in our nation’s history was either necessary for the sake of the companies’ economic survival or prudent for the sake of the nation’s economic recovery,” the report concluded.

Both companies have passed through bankruptcy proceedings and are continuing to restructure following the depths of the financial crisis, when GM and Chrysler executives traveled to Washington in need of bailout money.

Herbert Allison, assistant Treasury secretary, said administration officials “strongly disagree” with the report’s conclusions.

“The administration’s actions not only avoided a potentially catastrophic collapse and brought needed stability to the entire auto industry, but they also saved hundreds of thousands of American jobs and gave GM and Chrysler a chance to reemerge as viable, competitive American businesses,” Allison wrote.

The report said the Obama administration’s auto restructuring team firmly believed in the need to downsize the auto dealer networks to help the companies return to viability. After negotiations with the administration last year, GM and Chrysler announced the closings of more than 2,000 dealerships combined across the country.

The planned closings led to strong criticism from auto dealers and congressional lawmakers. Congress subsequently passed legislation requiring an arbitration process, which led to the two companies reinstating hundreds of dealerships.

The Barofsky report said the administration did not focus its restructuring efforts with potential job losses in mind. “It is clear that tens of thousands of dealership jobs were immediately put in jeopardy as a result of the terminations by GM and Chrysler,” the report said.

The report also criticized the administration for not doing more to oversee the carmakers’ plans to close dealerships.