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GM, Chrysler, Defend Dealership Cuts


General Motors and Chrysler executives defended the closings of hundreds of dealerships as they faced sharp criticism from U.S. lawmakers at a House hearing on Capitol Hill on June 12. The bankrupt automakers say the cuts were painful but necessary to preserve jobs and brand viability. But dealers argued the plans will do little to cut costs for the struggling automakers.

The closures of nearly 800 Chrysler franchises and more than 1,300 GM dealerships drew ire from both lawmakers and auto dealers Friday.

Republican Congressman Greg Walden said many dealers and communities were "blindsided" by the closures.

"Let's talk about accountability," he said. "Who made the closure decisions? How were they made? When were they made? How are customers served by less competition and higher prices while in the taxpayer's dime?"

Testifying before a key U.S. House subcommittee, GM chief Fritz Henderson acknowledged the sacrifices many dealers are being forced to make. But he said the cuts were necessary to save over 200,000 jobs at its remaining dealerships.

"This is our last chance. We simply cannot undergo the sweeping transformation without a comparable effort to reshape our retail network, one which was largely created in the [19]50s and the [19]60s," he said.

GM lost more than $30 billion last year, Chrysler lost $17 billion.

But dealers argued the closures will put more than 100,000 jobs at risk and hurt communities that depend on those jobs.

Tacoma Dodge dealer Dan Kiekenapp says his franchise was the number two-ranked dealership in Washington State when he received the termination notice from Chrysler.

"In the process, 35 faithful and loyal long-term employees have lost their jobs and Pearce County in the state of Washington has lost a payroll of $1.3 million per year," he noted.

Subcommittee chairman Bart Stupak said the dealership closings would likely hurt rather than help automakers.
But Chrysler President Jim Press said the company must move forward after it emerges from bankruptcy.

"Today's automotive industry cannot support the number of dealers currently in the marketplace," he said. "We've gone from 17 million new vehicle sales in 2006 to less than 10 million today. As a whole, the Chrysler dealer network is not profitable and not viable."

Mr. Press said Chrysler's 789 discontinued dealerships represent $1.5 billion in lost revenue last year. GM said the decision to reduce its dealerships will save the automaker more than $2 billion annually.

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