The Democratic-controlled House yesterday spurned the strong recommendations of President Obama and voted to undo the shuttering of more than 2,000 Chrysler and General Motors dealers closed as part of the restructuring of those two companies.The car companies aren't happy because they recognize that they way overexpanded the number of dealerships. Then state legislatures passed laws forbidding them from closing down dealers. Ah, politicians again. Now the bankruptcy provisions are structured to allow the dealerships to be closed. But politicians in Congress just can't stand for that to happen.
A source involved in the auto restructuring called the vote "hardcore bipartisan NIMBY," using the acronym for "Not In My Back Yard," a derisive term for politicians who take the most parochial views of issues, defying the "greater good."
As part of the auto companies' restructuring, Chrysler shut down 789 dealerships and General Motors informed roughly 1,300 dealerships that their franchise deals wouldn’t be renewed in 2010.
The legislation, drafted by Rep. Steve LaTourette, R-Ohio, and added in the Appropriations to the $24 billion Treasury Department funding bill, would stop those dealership closings and require Chrysler and GM to pursue any future closings in court.
“Chrysler has had many conversations with members of Congress to explain the critical importance of an effective dealer network,” said a Chrysler spokesman.This is why we shouldn't have to have politicians with control over the auto companies. Decisions get made for political reasons and not out of business sense.
Said a GM spokesman: "this legislation seeks to overturn the bankruptcy court’s decision after the fact to protect a single stakeholder among so many that have been called to sacrifice.”
Next step: a dealership closings commission modeled on the base closing commission which solved the problem of congressmen not allowing military bases in their districts to close.
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Along those same lines, we have Obama promising Detroit that GM will not move their headquarters out of Detroit to cheaper and smaller digs. We also have the new small cars being built not in lower cost Tennessee, but in higher cost Michigan.
Rick
Two Ladas in every garage and a Trabant in every pot (or fireplace)!
(I had to laugh when I typed "Tow" instead of "Two" in front of Ladas - twice!)
It really comes down to this: Who do you trust more - a car salesman or a Congressman?
Would you buy a Chevy Volt from Al Franken? (You can buy Charlie Rangel's Mercedes but you might owe taxes on it for his illegal use of Capitol parking as storage)
Wouldn't an expanded linkage between politicians and car salesmen be the worst of both worlds?
I shudder to think that Washington, DC will soon be known as "America's Biggest Car Industry Town".
Plus it appears through the automotive press that Chevy is going to rely on sales of a new Caprice, the current Camarro, the Impala and trucks to regain a reasonable market share. None of those cars will pass the CAFE standards of the future.
I'm taking bets now that either a Democratic or Republican controlled Congress will roll back some of these new requirements or be prepared to have to bail out GM again when its fails to sell enough high fuel mileage cars at a profit or enough of them to lower the average on its more popular rear wheel drive cars.
Did those dealerships to be closed by Obama underperform, or were they closed as payback for not contributing to the One and his Czarito?
If the first case, they will fold on their own when they can't sustain themselves; if the second case, the Congress is right for doing wrong, they should not be closed. Provided, of course, the Congress will not bail them out with our money when they go bankrupt later.
This is different from base closing that all bases are paid for by the taxpayers, while the dealerships have to earn their existence going forward.
Imagine you have mortgaged your home and everything else to build a state-of-the-art dealership as required by the auto "giants" else they would not let you sell their cars. Imagine that you are able to build the palatial dealership because you have done very well selling a lot of cars before the market crash and you believe you will recover when the recession is over. Imagine here comes His Oneness who decrees your livlihood be destroyed for not supporting him on his quest for deification.
The dealership which sold us our Jeep is closed, the building is 2 years old. Down the road, another dealership with a brand new building closed. When will we sheeples fight back? Why should we trust the most clueless, the most corrupt politician in our life time to do the right things for the good of the country? Why should we lose our livelihoods on his say-so?
Why should these car dealers "sacrfice" while those at Goldman Sachs make record bonuses from us. Yes, Goldman paid back the tarp, but they received 100% on their $15 billion credit swap from AIG courtesy of the taxpayers. Goldman also makes record profits from selling Fed bonds. Yet those who work their tails off, invest all they have in their business, sweat about the payrolls are the ones to sacrifice.
But this begs the question of why we're so impressed with the ability of the private sector to make good decisions - GM, GE, BofA, Moodys, AIG, Enron, Tyco, etc.
What about Crocs and Starbucks - overextending themselves to please investors in the short term while diminishing the long term expectations of the business.
It's not an either/or thing with government versus the private sector.
Maybe they need a BRAC commission.
Crocs and Starbucks are not only instructive examples but for two reasons. Crocs rarely paid a dividend so the only way its owners could make money was to expand and drive the stock price higher. Basically a Ponzi product.
Starbucks was actually doing quite well off a peak in 2007 and early 2008 when the economy took a dive, McDonald's cut into their market share and the entire market became saturated with other compeititors. Neither of these decisions could have been reversed by the 2nd tier Ivy students that didn't get hired by their first choices and went to work for the government instead.
Starting with the Spruce Goose and ending with the ISS the government has shown an amazing talent for picking popular and easy to defend goals, making a hash of them and ten years later still slapping on the defibrallators and yelling clear in an effort to revive the corpse.
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