House Approves Chrysler, GM Dealer-Reinstatement Legislation

July 17, 2009
U.S. Capitol

U.S. Capitol

From Washington comes potentially bad news for Chrysler Group and General Motors Company: yesterday, the U.S. House of Representatives passed legislation that would reinstate 789 Chrysler dealers and around 2520 GM dealers to their respective networks.

To recap: the dealers in question were cut from the two companies' networks during the Chrysler/GM restructurings. The dealers argue that they were eliminated unfairly and that they should be given the opportunity to make a go of it. Chrysler and GM both insist that their dealer networks are too large and redundant for today's marketplace. Peter Grady, Chrysler's vice president of network development and fleet, put it like this: "If Congress reverses this [dealer elimination] process, it flies in the face of a U.S. vehicle market that has declined 40 percent since 2007. Indeed, the U.S. dealer network was built to serve a market that once sold 16 million vehicles a year. Those days are gone."

Folks on both sides of the argument have pressed their cases on Capitol Hill in recent weeks. Dealers terminated from their networks have been lobbying hard for passage of the bill, while the Obama administration and its allies, including Chrysler and GM reps like Mr. Grady, have been arguing against it. Dealers who remain in the Chrysler and GM networks have been stuck in the middle, although the National Automobile Dealers Association heartily supports the legislation, arguing that if the Chrysler/GM dealer cuts are allowed to stand, they may cause the loss of 170,000 jobs.

Now here's where things get interesting: the bill that passed the House of Representatives did so by is fairly slim margin (219 to 208), and its was part of a larger spending bill to which Obama objects and has indicated that he would likely veto. Whether the bill will pick up enough steam to pass the Senate is up for grabs. Senate Majority Leader Harry Reid (D-NV) had initially said he wasn't even inclined to consider dealer legislation, but that was before 25 Senators signed on as cosponsors.

Furthermore, if the spending bill fails, there's a second piece of legislation under consideration in the House -- a standalone bill that would accomplish the same dealer reinstatement goal. Over 242 House members have registered as cosponsors of that legislation, which could make its way to the floor by the end of July. Either way, the fat lady hasn't even thought about warming up.


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