President Obama’s plan to save GM and Chrysler through forced bankruptcy got blindsided on Monday by the other two branches of the federal government.
On Monday afternoon the Supreme Court agreed to delay the sale of Chrysler’s assets to Italian carmaker Fiat in order to further consider the argument of three Indiana bondholders who claim they were shortchanged by the prepackaged bankruptcy organized by the Obama administration.
But the court decision was only the half of it. On Capitol Hill, hundreds of lawmakers threw another wrench into the works when they formally asked the Obama administration to get Chrysler and General Motors to put the brakes on plans to close hundreds of local dealerships across the country.
A spokesman for the Supreme Court said late Monday that the justices could meet anytime to determine whether or not to grant a writ of certiorari, or order oral arguments on the issue.
The court’s action creates a test for Obama, whose Auto Task Force worked to structure a deal between Fiat, Chrysler, organized labor and Chrysler’s debt holders before the company filed for bankruptcy.
A senior administration official downplayed the court’s action.
“We understand this to be an administrative extension designed to allow sufficient time for the Court to make a determination on the merits of the request for a stay,” the official said.
Meanwhile, lawmakers took the matter into their own hands with a strongly worded letter to the president, arguing against the closing of dealerships.
At the same time that the letter, from over 100 House members — the lion’s share of whom were Democrats — was traveling from one end of Pennsylvania Avenue to the other, two Democratic freshmen introduced legislation that would force the bankrupt car companies to abandon their plans for mass dealership closings.
That bill, introduced by Reps. Dan Maffei (D-N.Y.) and Frank Kratovil (D-Md.), had a list of original co-sponsors that was “growing by the minute” as members were racing back to Washington on Monday afternoon, according to a spokeswoman for Maffei.
In a sign of just how serious members have gotten about preventing the closings, the letter to Obama was spearheaded by House Majority Leader Steny Hoyer (D-Md.), while the legislation was shepherded by Rep. Chris Van Hollen (D-Md.), the chairman of House Democrats’ reelection efforts.
“Closing these dealerships will put over 100,000 jobs at risk at a time when our country is shedding jobs at an alarming rate,” Hoyer and a significant portion of the Democratic Caucus wrote to the president. “We also question the criteria being used to determine which dealerships should be closed and the fundamental fairness involved in this effort.
“It is our view that the market should make these decisions rather than leaving it up to the manufacturers whose poor leadership contributed to their demise,” they wrote.
The White House did not have an immediate reaction to the letter.
Maffei and Kratovil’s legislation would seem to take the ball out of Obama’s court altogether, though, by forcing the government-backed auto companies to halt the closing of dealerships, a process that the bill sponsors criticized as “arbitrary.”
“Forced, arbitrary closure of dealers by manufacturers will not necessarily be financially beneficial to automakers, and it certainly will not help the local economies where dealers are integral to the business community,” Maffei said in a statement.
The efforts from lawmakers on Monday point to the perilous line the administration must walk in trying to save companies responsible for millions of American jobs. The government’s intervention is having the effect of forcing those companies to enact necessary cost-saving measures that threaten jobs in hundreds of backyards across the country.
Just last week, Rep. Barney Frank (D-Mass.), the powerful chairman of the Financial Services Committee, was able to get GM to undo a planned parts distribution center closure in his district.
When GM announced its post-bankruptcy plan last week, it noted that plants in at least 12 congressional districts would be on the chopping block.
So far, though, only Frank has been successful in getting a local plant saved. But other fights are already brewing.
Yet the dealer network presents a much more significant political problem for the former auto giants and for Obama’s Auto Task Force.
“There’s not a congressional district that doesn’t have a car dealership in it somewhere,” said a Democratic aide.
That fact was reflected in the signatures placed on the letter to Obama, which came from representatives from Hawaii to Maine, from urban and rural areas, and from safe and vulnerable districts alike.
Critics of the dealership-closing plan argue that the goal of the auto bailout should be the creation of jobs, not the elimination of them. They further argued that the absence of enough dealers to sell GM and Chrysler vehicles will hamper their efforts to return to profitability.
“Our efforts to revitalize the auto industry in America must include a vibrant dealer network to sell and service first-rate GM and Chrysler products,” said Van Hollen, who signed the letter to Obama and backed Maffei and Kratovil’s bill. “These small businesses employ hundreds of thousands of people and are an integral part of local communities all across this nation.”
Michael O’Brien contributed to this article.