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GM Closes 500 Dealerships Despite Congressional Objections

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On: Tue, Nov 2, 2010 at 11:37AM | By: Sherry Christiansen


GM Closes 500 Dealerships Despite Congressional Objections

In spite of the fact that approximately 24 congressional members (both Republican and Democratic) voiced objection, General Motors Co. proceeded to close the doors to 500 dealerships on October 31st,  as planned. 

There were 22 house members asking automakers to hold off on termination of dealerships until the completion of a federal investigation that was implemented in order to address allegations of foul play that may have occurred during the process of selecting which dealerships would be forced to close shop.  Republican Minority Leader John Boehner of Ohio and Rep. Steven LaTourette, congressman suggested that the Obama administration suspend the 500 GM dealerships scheduled to be terminated October 31st.  Senator Sherrod Brown, Democrat of Ohio was also one of the members of congress asking for a delay in dealer closings while waiting for the courts to rule on appeals filed by dealers involved in the recent arbitration hearings.

Ryndee Carney, spokesperson for GM stated that every dealer agreement expired October 31st and that dealerships that will continue have brand new contracts that became effective November 1st.

Carney further stated; “a suspension of the terminations “would only divert our collective attention at a critical time and would ignore the independent decisions of arbitrators and individual settlement agreements between GM and its dealers.”

In 2009 when General Motors was looking at impending bankruptcy, the Detroit automaker had selected 500 dealerships that would be forced to close by October 31st. The 500 dealerships involved 1,233 franchises that were terminated according to Carney.

The remaining 806 stores (of the total 2,039 franchises originally selected for elimination) were re-instated as a result of winning dealer arbitration cases, according to Carney.

LaTourette who initiated the effort to delay dealership closings stated today; “there is no logic or necessity to shut down these dealers while an investigation is ongoing.”

His argument stated that if dealerships were closed and then illegal activity was discovered by investigators, those stores would have a difficult time re-opening.

According to Auto News.com; “The special inspector general of the U.S. Troubled Asset Relief Program is investigating the closure of more than 2,000 GM and Chrysler dealerships during and after the companies' bankruptcies last year.”

During a July audit by the inspector general, Neil Barofsky (former prosecutor) condemned the way dealership closings were handled not only by automakers, but also by the administration as well. Some terminated dealerships have filed appeal cases in federal court.

To discover the outcome of the federal investigation, stay tuned to the auto shopper with more breaking news to come.




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