By Silla Brush and J. Taylor Rushing - 06/03/09 07:24 PM EDT
Senators from both parties criticized the closings of thousands of dealerships in their states as part of the restructuring of General Motors and Chrysler.
The two carmakers, now in bankruptcy and receiving roughly $70 billion in taxpayer bailout money, are in the process of closing nearly 3,000 dealerships across the country. The dealership issue in particular is touching a raw nerve in Congress as lawmakers see some constituents forced to close their businesses in a matter of weeks, or even days.
The heads of both Chrysler and GM defended the dealership closings as a necessary way to resize their firms.
“The decisions had to be made,” said James Press, president of Chrysler. “They were gut-wrenching, but absolutely necessary for Chrysler’s survival.”
Chrysler said the dealerships cost $1.5 billion in lost revenue in 2008. Lobbyists for dealerships have been ramping up pressure on lawmakers to help prevent closures.
Chrysler is closing 789 dealerships, while GM, by the end of 2010, plans to slash more than 2,000 of its 6,000-plus dealerships. Sen. Kay Bailey Hutchison (R-Texas) estimated that roughly 40,000 jobs are at stake in the Chrysler closings alone.
“It’s not our place to change your decisions,” Hutchison said. “But it certainly is our place, especially where there is so much taxpayer money involved, to make sure that everyone is treated as well as can be in this circumstance.”
Those losses are on top of the thousands of Chrysler manufacturing jobs likely to result from the restructuring, as well as the roughly 20,000 that will be cut in plans announced on Monday by GM to close or idle 14 plants.
The backlash to the dealership closings comes as Congress begins to negotiate its thorny new role of overseeing two icons of American manufacturing whose survival now depends on government bailout money as they work through bankruptcy proceedings. For congressional Democrats, it represents another challenge: of exercising oversight of a highly unpopular move by the Obama administration to bail out the auto industry.
“I think it’s starting to hit all of us in the face what government-managed economies feel like,” said Sen. Jim DeMint (R-S.C.).
Sen. Chris Dodd (D-Conn.) called a Senate Banking Committee hearing for Wednesday to look into the Obama administration’s efforts to oversee the restructuring of the auto industry. Meanwhile, Republicans on the House Financial Services Committee are calling on Rep. Barney Frank (D-Mass.), the committee chairman, to hold a hearing on the two auto companies, though he has yet to schedule one.
Rep. Darrell Issa (R-Calif.), ranking member on the House Committee on Oversight and Government Reform, wrote a letter to the Treasury Department criticizing the administration for “a misuse of the authority” in its work on the Chrysler dealership closings.
Congressional Republicans, in particular, are seizing on the issue to slam the administration.
Senate Republicans plan to unveil a bill on Thursday that would redistribute the federal government’s share of stock in GM and Chrysler from the Treasury Department to individual taxpayers.
The bill, to be proposed by Minority Whip Jon Kyl (R-Ariz.), Senate Republican Conference Chairman Lamar AlexanderLamar AlexanderDemocrats block energy spending bill over Iran amendment Overnight Finance: Puerto Rico pressure builds; Big tariff vote Wednesday Senate votes to increase wind energy funding MORE (Tenn.) and Sen. Bob Bennett (R-Utah), would also restrict additional taxpayer-funded bailouts for the auto industry.
Alexander said this week that it would be the best way to avoid government ownership of GM lasting for years. The bill would break up the 60 percent share of GM that belongs to the federal government into stock certificates to be mailed to the roughly 150 million Americans who filed tax returns this year. Alexander said without such a bill, distributing GM stock could take several years.
“I want the Treasury also to have the option of getting the ownership of these companies out of the hands of Washington and back into the hands of the marketplace in months rather than years,” Alexander said. “Distributing new GM shares to individual taxpayers is a way to do that.”
Alexander said the bill would also prevent awkward situations for the federal government, such as during congressional debates over fuel efficiency standards, as well as politically sensitive situations such as decisions to build plants in certain states during campaign seasons.
“When the company negotiates with the federal government on such things as, for example, fuel efficiency standards, won’t it be negotiating with itself? And as the elections approach, might not the White House be tempted to build plants in states it might carry instead of states it might not?” Alexander asked.
Sen. Mike JohannsMike JohannsTo buy a Swiss company, ChemChina must pass through Washington Republican senator vows to block nominees over ObamaCare co-ops Revisiting insurance regulatory reform in a post-crisis world MORE (R-Neb.) has a separate amendment that would require congressional approval should the government choose to purchase stock in private companies as it has most recently with GM. The government invested more than $30 billion in the car company on Monday right after it filed for bankruptcy and now holds a majority equity stake in the firm.