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General Motors, Chrysler to face Senate scrutiny on dealerships


General Motors Corp. and Chrysler LLC, both under bankruptcy protection, will try today to ease congressional concern, and in some cases anger, over their plans to slash more than 2,400 dealerships, Reuters reported. Members of the Senate Commerce Committee plan to grill GM CEO Fritz Henderson and Chrysler President Jim Press about the lone aspect of restructuring that has triggered a broad response from Congress, because the affected dealers are located nationwide.

The dealers at risk employ more than 100,000 people, according to industry estimates.

“Rapid dealer reductions increase unemployment, threaten communities and decrease state and local tax revenue without any material corresponding decrease in an automaker’s costs,” said John McEleney, chairman of the National Automobile Dealers Association. McEleney is the president of dealerships in Clinton and Iowa City that sell GM, Toyota Motor Corp. and Hyundai Motor Co. vehicles. In his testimony, McEleney will emphasize the need for government to provide new financing to Chrysler so the company can buy back unsold inventory, parts and other assets, and give dealers more time to close their businesses.

Press told Congress last month in a letter the company would help dealerships losing their franchise agreements beyond the deadline set by the company. Chrysler plans to shut 789 showrooms, about 25 percent of its dealers, by June 9.

On Monday, a bankruptcy judge in New York approved the sale of substantially all of Chrysler’s assets to a group led by Italy’s Fiat S.p.A., despite objections from dealers and other groups that Chrysler was moving too fast. The court still must approve Chrysler’s dealership strategy.

Chrysler, which is close to stepping out of bankruptcy protection, would not comment on Press’ testimony ahead of the hearing.

Henderson, who steered GM into bankruptcy on Monday, plans to depict his plan as a softer landing for dealers not part of GM’s future. GM wants to cut 1,100 of its smaller and least profitable dealerships and will lose another 470 by cutting its Saab, Saturn and Hummer brands. GM expects to offer an agreement to those businesses slated for closure that would wind down their operations in orderly fashion over the next 18 months. GM plans to end up with about 3,600 showrooms.

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