By on July 10, 2009

The House Appropriations Committee has passed a provision in the 2010 financial services spending bill that would require GM and Chrysler to work through state courts—instead of the federal bankruptcy court—to terminate dealerships. Rep. Steven LaTourette, R-Ohio, sponsored the amendment. Ignoring the fact that federal bankruptcy law trumps state bankruptcy law, LaTourette explained, “Car companies have used bankruptcy to run roughshod over state bankruptcy laws.” In reporting this, Automotive News made what has to be the understatement of the month, if not of the year: “GM opposes the House bill.”  Ya think???

GM mouthpiece Greg Martin claims the legislation would “put our long-term viability at risk.” To back up this assertion, he stated “We’ve taken extraordinary efforts, from product planning to manufacturing to labor agreements, to reinvent the company, and we need a dealer network to match.”

Whoa! Did he say they’ve “taken extraordinary efforts” in “product planning?” Let’s see . . . they’re planning Cadillacs that overlap Buicks, Chevys that overlap Buicks, a redundant line of badge-engineered trucks and killing the brand with two cars unique to their lineup (G8 and Vibe). I could go on. Suffice it to say, GM has some legit reasons for killing dealerships; but “product planning” isn’t one of them.

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34 Comments on “House Bill Wants to Reinstate Terminated Dealerships...”


  • avatar
    GS650G

    GM isn’t killing dealerships. The lack of sales is. Next think you know we’ll see that GM has the right to our money for it’s cars.

    Oh, wait……..

  • avatar
    mo V

    Culling local dealers and creating a “competition vacumn” to artificially drive up the price/demand for your product is a viable economic practice. Alienating current and potential customers must just be “acceptable risks”.

  • avatar

    Sounds like a good way to go…for the lawyers.

    Federal bankruptcy law entirely trumps state bankruptcy law. If passed, this could get struck down as unconstitutional.

    It’s quite possible that Congress doesn’t expect this to stick. But Congresspeople need to demonstrate to the dealer owners who make big contributions that they’re doing what they can. This bill does that.

    Beyond that, pick a direction, and go with it. The government needs to avoid forcing GM in two different directions. No point in bailing them out then bogging them down in bankruptcy courts.

  • avatar
    BuzzDog

    Sigh…the lobbyists/inmates are once again trying to run the asylum.

    It’s not enough that we’re trying to apply a different set of bankruptcy rules to the auto industry; there is still a deafening silence to the fact that dealer contracts are a prime example of restraint of trade. Where are the screams of anti-trust advocates?

  • avatar
    at40

    It’s quite possible that Congress doesn’t expect this to stick. But Congresspeople need to demonstrate to the dealer owners who make big contributions that they’re doing what they can. This bill does that.

    I disagree…Congress does feel that this can stick….that is why between the House and Senate there are almost 250 bi-partisan cosponsors. THere is no question the Federal BK law trumps the state but a Federal Law Trumps everything. We all know the BK was engineered…come on 40 plus days….whaaaat!!! And this was the only way to pay the dealers back and remove them…use the BK as the method. Natural attrition over this year would have gotten GM to a more manageable number but they had to be greedy and pay back some dealers who oppossed them over the years. As a Washington insider I caution those who think this movement is all smoke and mirrors…its not. GM and Chrysler are very worried,,,,if they weren’t they woouldn’t have camped out in DC for the last two days knocking on doors…which for the most part did not open. Dealers give support ( $$’s) and votes…GM doesn’t ….it just takes money.

    It should be a wild ride.

  • avatar
    Pch101

    If passed, this could easily get struck down as unconstitutional.

    It’s a stupid, stupid, stupid proposal, legislation at its worst. But there would be nothing illegal or unconstitutional about it.

    Statute can override court precedent unless the statute is unconstitutional, and I doubt that anyone could establish it as being unconstitutional. What grounds would there be to argue that it violates the Constitution?

  • avatar
    at40

    Hi PCH101…how are you today. Its great to see that we can agree that its not illegal or uncontitutional. They fact that you think its stupid and I don’t is what makes horse races. God Bless America…or what is left of it.

    And at least 250 of our finer Statemen don’t think its stupid either…

  • avatar

    at40:

    GM and especially Chrysler certainly treated their dealers as bad as they possibly could.

    I’m not expert on the Constitution. But the Supreme Court can trump Congress, if this law is unconstitutional–so Federal law doesn’t trump everything. Are there legal grounds for pushing these cases through state courts?

    Does the number of cosponsors provide evidence that something will stick? I can see that there might be enough support to override a Presidential veto, making such a veto less likely.

    But Obama signing such a law…he’s in a tight spot.

    Most likely the dealers will end up getting paid off, at the expense of more Federal debt.

  • avatar

    Wow, they totally missed the point of restructuring.

    This is some feel-good politicking for the benefit of those small towns in which the single Chevy dealer who has been there for decades is slowly withering away and scaring the beejebus out of the locals.

    Let em go people, let em go.

  • avatar
    Pch101

    Are there legal grounds for pushing these cases through state courts?

    I don’t see how the state courts have anything to do with this issue. Bankruptcies are a federal matter. Courts follow the law, so barring a constitutional violation, the statute will trump the court.

    The one issue here may be the retroactive nature of it. This law would effectively force the debtor to accept a burden that had been discharged previously by a court. If there’s an issue, that’s it; if I were new GM, I’d be howling about the ex post facto nature of the decision, and they may well prevail on that basis.

  • avatar
    jkumpire

    Folks,

    There may be a lot of things I don’t understand about the car business, but as I have followed the proceedings on the dealer killings by the two branches of Government Motors there are two important points:

    1. There is no coherent reasoning why dealer X was cut over dealer Y. So when the Feds come in, do all kinds of things that are wrong (secured creditors, anyone?) and dealers are culled, bias and unfairness are the first and natural reactions of people who lost their economic livelihood. Who champions them? Who protects their rights? Or are these people just supposed to shut up and lose their shirts and take a haircut and take one for Obama and the team?

    2. Many of us have read the new franchising agreements, and all the little add-ons that the Government Motors people put into them. Then it was take it or leave it. If the suits with the backing of the FEDS can hose dealers like that, why should these people be forecd to just do what they are told without some kind of fight?

    I just don’t understand it, if dealerships have to be cut, fine, let the market in this very tough recession cut the weak dealers. But just going through and running loyal dealers out of business for no good reason, and illegally as I understand it in some cases, is wrong. Why shouldn’t those affected try and get their rights restored?

  • avatar
    Autojunkie

    at40:

    “GM and especially Chrysler certainly treated their dealers as bad as they possibly could.”

    How about the dealers treated their customers as bad as they possibly could.
    As much as I love the industry, I always HATED dealing with the shiester dealerships! From charging double (no joke) the amount than an independant garage charges for repairs, or the salesman that tries to slip $1500.00 onto the bill of sale and only states it as “other charges” and gives no explaination when asked what “other charges” are. And these are only two of the many reasons I have told a dealership to F-off and walked out.

  • avatar
    mpresley

    Is this Commander Riker, and is he going to make it so?

  • avatar

    Autojunkie,

    The two Chrysler dealers who’ve treated me badly were not among those cut. I don’t think that customer satisfaction was a criterion when deciding which dealers to shutter.

    Pch101,

    I’ve removed the “easily” from my earlier post, because I really don’t know the ins and outs of the Constitutional law in this area. When I first wrote that, I thought that the proposed law might give to the states powers that are currently in the Federal domain, but I really don’t know.

    I am thoroughly sick of all of the partisan Obama this and Obama that rhetoric. He didn’t create this mess, and as I see it is doing his best to act decisively and clean it up.

    My own personal stance? I’m against oversimplified “solutions” from all sides.

  • avatar
    Pch101

    I just don’t understand it

    You don’t understand it because you are choosing to get your education from right-wing political bloggers who frankly don’t know what they’re talking about.

    There was nothing illegal about the bankruptcy or dealership terminations. Contract terminations are perfectly legal in a Chapter 11, per the Supreme Court.

    Bankruptcy court is a place in which two opposing sides tell opposing stories in the hopes that one of them will win. Having a story to tell does not mean that the story is a good one.

    While there were creditor-biased arguments to be made against them that got plenty of attention in the press, the courts heard those arguments and decided that those arguments were wrong. That’s how bankruptcy courts work — both sides get to pitch their version of reality, and the judge picks one. Sometimes you win, sometimes you don’t.

    What simply fascinates me is how in the blogosphere that it has become fashionable to feign expertise about topics of which the blogger has no knowledge. In the process, they regurgitate the arguments of a few attorneys who were already in their camps, without understanding that they are simply telling their own version of the story but not providing the entire picture.

    Let’s all understand — just because you personally dislike a certain action does not make that action illegal or unconstitutional. If you are going to argue that the court acted improperly, you should be prepared to prove it.

  • avatar
    taxman100

    When the Obama Administration decided to run Chrysler and GM through a “wham, bam, thank you Ma’am” bankruptcty, rather than allow a proper airing of legal issues, you most certainly will get “blowback” (kind of like passing a $787 billion spending bill without reading it).

    Federal law may trump state law, but you are still entitled to due process, if it can be proven.

    The entire government/big business incest is going to destroy this country.

  • avatar
    at40

    Let’s get this out in the open. I am a GM dealer with mulitle franchises in a metro city. One of my stores is a move-forward, one is a wind-down and one is being sold to an off seas enity….so I have the ‘best’ of all the scenarios. In addition I stare at my legal degree haningin behind me head in my office.

    PCH 101…I agree there was nothing “illegal” about this Bk but without the “engineering” by the gov’t and the Task force the dealer closings could have never taken place. ALso 850 objections cleared in 2 1/2 days…..I think not.
    i’ve read case law and its really strange what took place…was the gov’t engineered Bk fair to all parties…no….but it was on obvious tweak of the nose to long standing principles and yes law…

    I have said for years there are too many dealers but there is really no clear cut method that was used. I have examined GM postion paper entered into evidence at the hearing where Fritz and others testified and its is pretty weak.

    Dealers need their rights protected. I am sure if the dealers were given PROPER termination benefits ( $$’s) then there would be no complaint…few if any got close the the million dollars claimed. And a normal termiantion of cars, parts, tools, signs, leases, etc would have cost GM a lot more…and the gov’t couldn’t have that….but wait and see…..

    These are the two scenarios that will play out….

    #1) complete restoration of rights
    or
    #2) A lot more money thrown at dealers

    Plain and simple the fish stinks from the head to toe on this one,

  • avatar
    BuzzDog

    Dealers need their rights protected. I am sure if the dealers were given PROPER termination benefits ( $$’s) then there would be no complaint…

    The market is the ultimate protector of dealers’ rights.

    And proper termination benefits? Give me a break, this is a bankruptcy!

  • avatar
    no_slushbox

    There could be Constitutional issues with Chrysler.

    Chrysler had the dealer contracts voided in bankruptcy, and now Chrysler is out of bankruptcy and the contracts are gone.

    To force Chrysler to take back pre-bankruptcy dealers would be, in effect, to force a private company (majority owned by Fiat and the UAW) to enter into new contracts against its will.

    However, the legislation that I’ve seen gets around that. It doesn’t say that Chrysler has to take back its pre-bankruptcy dealers, it says that if Chrysler does not take back its pre-bankruptcy dealers then the federal government can’t give it any more money.

  • avatar
    golf4me

    This will go nowhere fast. It’s just window-dressing for these politico’s big donors (dealers). According to the Constitution, no law can be passed that is retroactive. These dealers were let go legally under current BK laws. It cannot be undone. However, if the law does pass, it can help dealers in the future, but that’s about it. Too many dealers is parasitic, especially when they lowball eachother, eating into profits, and the first thing to go is customer service. This is one of the biggest reasons for culling the cords of deadwood there was out there. They can pass the law all they want, but it will be thrown out in court. Plus, Obama won’t sign it now that he’s in charge of the companies in question, but at least the lawmakers can turn to their contribtors and say “hey we tried”…

  • avatar
    no_slushbox

    The dealers need to stop whining about contracts. If dealers had any respect for contracts then they would live by their original contracts, instead of lobbying for state laws that force automakers to give dealers much more, upon termination, then the dealers ever bargained for in their original franchise contracts.

    This is not the government, the President would love to keep all the dealers and not face this backlash.

    However, the government asked the management of GM and Chrysler what they need to survive, and one of the things they said they need is to get rid of a ton of excess dealers during bankruptcy.

    If the dealers didn’t want government involvement then they shouldn’t have threatened politicians and manipulated the media last year to get it.

  • avatar
    Pch101

    without the “engineering” by the gov’t and the Task force the dealer closings could have never taken place

    This is absolutely false. 100% wrong. I am growing really tired of the disinformation campaign and outright lies that are being spun about this story, and they need to stop.

    The Supreme Court has already ruled that contract terminations are perfectly legal in a Chapter 11. Read the cite and deal with it: http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=us&vol=465&invol=513

    The benefit of the government involvement was that the whole thing didn’t become a 7, in which case every single dealer would have been terminated because there would be no business at all. The surviving dealers should count their blessings, as they really aren’t entitled to anything.

    The internet has become a great source of distributing bad information. Just because you say that it was illegal doesn’t mean that it was.

  • avatar
    loverofcars1969

    Yet another jackass elected by the people.

  • avatar

    at40:

    These companies cannot afford to pay off dealers. So if there’s any payoff, it’ll be from the government. And what obligation does the government have to pay off dealers?

    Not saying it won’t happen, but it’ll be based on politics, not rights.

    I think the main reason so many people are upset about the entire bailout is that a lot of people will be benefitting who do not deserve to benefit. Since management and the UAW are getting slices, should dealers also get a slice? What’s another few billion in loans from China?

    I personally want to see these companies survive, but must admit that the continuing lack of team play is upsetting.

  • avatar
    at40

    From a legal standpoint the legislation is sound…believe you me. WHen the House and Senate vote and both pass it Obama will be at a cross-road….can he veto…sure he can…does he want to….I am not so sure he can stand the political backlash that will come and even if he does veto it still can be come law with a 2/3 majority vote in each house.

  • avatar
    AndrewDederer

    That something like this came up is not surprising. That it came up in the House is even less so.

    Simple fact, the House is set up to repressent all those local guys (and car dealers are way up the list of important voices in a lot of districts). Why do you think there were so many laws making cutting them impossible?

    For this bill to mean anything more than hot air, it’ll have to get through the Senate (or at least a conference committee). Car dealers still have some pull at the statewide level, but not nearly as much. Especially if the state also has plants, that’s a lot more votes.

  • avatar
    Pch101

    To force Chrysler to take back pre-bankruptcy dealers would be, in effect, to force a private company (majority owned by Fiat and the UAW) to enter into new contracts against its will.

    You’re right. And that would be illegal. So you have a point, this law should not survive a court proceeding.

  • avatar
    at40

    Let’s be truthful to ourselves…most of this motion is for the GM Dealers…I admit that to reopen a shuttered Chrysler store is tough…

  • avatar
    gslippy

    The Emperor has no clothes, and his subjects refuse to believe it.

    Captain Smith ordered the Titanic to maintain its high speed, too. What a great idea, Rep. LaTourette.

  • avatar
    50merc

    “Unconstitutional” isn’t the same as “I don’t like it.”

    What does the Constitution say about bankruptcy? Just this: Article 1, Section 8: “Congress shall have Power To … Establish … uniform Laws on the subject of Bankruptcies throughout the United States”.

    Is there even such a thing as state bankruptcy law, or state bankruptcy courts?

  • avatar

    Both sides of the political fence are supporting this. No reason to think it would be any different had the country gone the other way in the election.

    What that means is that we need to stop blindly supporting the current two so that we can have another viable option to keep them honest.

  • avatar
    gslippy

    @nathaniel: You are correct. GB2 supported the original bailouts; OB1 just put the pedal down. Both are Changes I Don’t Believe In.

  • avatar
    Geotpf

    Michael Karesh :
    July 10th, 2009 at 11:24 am

    Sounds like a good way to go…for the lawyers.

    Federal bankruptcy law entirely trumps state bankruptcy law. If passed, this could get struck down as unconstitutional.

    It’s prefectly constitutional for the Federal Congress and President to sign a bill that changes this.

    Not that it’s a good idea, but there are lots of bad ideas that are constitutional.

  • avatar
    hnay

    Are there any car dealers or car dealer relatives who have posted? I think not. My father is a Dodge dealer. I believe in capitolism, but… what chrysler did to my father was robbery. He was a viable dealer selling 50-60 cars per month but… because he did not do what they wanted because he did not see some of the things they wished as sound business decisions they decided they wanted someone else in his market. If the market is not viable close the dealership. I understand that. But guess what…. Chrysler has given the dealership to another dealer which my fathers old facility will be houseing for rent since he owns the property. How many more dealers are there like him? I think many more than people want to admit to. Where is the democracy in that? This is the reason that franchise laws are in effect. This is the reason that the bill MUST pass! In order to hold accountable a company that used the court system to bypass franchise laws on people that they did not want in place. My father has kept a viable company profitable for over 39 years… how much did chrysler and GM combined make last year? O zilch nothing and they think he is the one who is not an appropriate business man.


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