Auto dealers lobby Obama on cuts in GM, Chrysler outlets

Thursday, May 7, 2009 at 11:59pm
Doron Levin, Bloomberg News

General Motors Corp. and Chrysler LLC won’t be more likely to survive if the automakers’ dealer ranks are “drastically reduced,” the retailer’s trade group is telling President Barack Obama.

“Cutting dealers at this time would do absolutely nothing to make either GM or Chrysler more viable,” John McEleney, the National Automobile Dealers Association’s chairman, said in a letter to Obama that will run as an ad in The Washington Post. “The idea that dealer numbers should be rapidly and drastically reduced apparently comes from Wall Street advisers.”

The president’s autos task force has pushed GM and Chrysler to become smaller and reduce costs, including trimming their retailer networks. Both automakers are surviving on federal loans, with Chrysler filing for bankruptcy last week and Detroit-based GM facing a government-imposed June 1 deadline to make cuts to avoid court protection.

GM said on April 27 that it will shrink its number of dealers 42 percent to 3,605 by the end of 2010, from 6,248 at the end of last year. Chrysler hasn’t announced yet how many of its 3,200 outlets may be eliminated, with President Jim Press saying May 1 that it “won’t be a huge catastrophic number.” Scott Silverman, a Boston-based lawyer who represents dealers, said he expects Auburn Hills, Michigan-based Chrysler to trim about 25 percent.

McEleney, a retailer in Iowa for GM, Toyota Motor Corp. and Hyundai Motor Co., said in the trade group’s letter that “manufacturers need revenue, and the only way to get it is to sell more cars to dealers.” A “radical reduction” in outlets would put 150,000 people out of work, he also said.

Officials of the Virginia-based group are scheduled to meet with Obama’s task force on May 14. Dealers plan to fly to Washington to confer with members of Congress the day before.
“Dealers aren’t the problem,” said Dale Early, a Chrysler retailer in Kingwood, Texas. “The offices and field personnel the automakers provide aren’t essential. We don’t need them to do what we do.”