By Ian Swanson - 07/21/09 04:41 PM EDT
Ron Bloom, a senior adviser at the Treasury Department heading the administration's efforts on autos, warned members of a House Judiciary sub-panel that an intervention by Congress on behalf of auto dealers would set a "dangerous precedent" that could raise enormous legal concerns.
Members of Congress don't understand why seemingly successful dealerships in their districts, which sometimes are also seen as local community pillars, are being targeted for closure.
Rep. Steve Cohen (D-Tenn.), who chaired Tuesday's hearing, wonders why John Roy's Chrysler dealership in his district was terminated. Roy was the only African-American Chrysler dealer within a 300-mile radius around Memphis, and won business from four states. He was No. 1 in sales in the Memphis metropolitan area, but was still terminated.
"To me, it is unconscionable that Chrysler would treat a successful and loyal dealer in such a manner," Cohen said in an opening statement.
In testimony on Wednesday, GM and Chrysler will say they have too many dealerships and that this cuts into their costs. GM had roughly 6,000 dealerships in the U.S. compared to 1,240 for Toyota before its bankruptcy filing. It will still have more dealerships when it emerges, according to testimony to be offered on Wednesday.
Bloom said the actions by Congress could make if more difficult for the two troubled companies to emerge from their bankruptcies, specifically by making capital markets wary of offering them money for fear Congress might overturn "judicially approved business decisions any time that it disagrees with the judgments of the companies."