By on February 21, 2010

The Colorado House’s passage of HB-1049 [PDF here], a bill requiring restitution for dealers culled during the Chrysler and GM bankruptcies, has drawn a $60,000 “no” campaign from General Motors. The Denver Post reports that GM’s ad campaign, which features lines like “we must keep driving forward to repay our government loans,” and “don’t let special interests stick taxpayers in reverse,” has riled up local lawmakers more than ever, drawing such timeless put-downs as: “they must be spending tax dollars on Botox to say that with a straight face.” The bill would require OEMs compensate culled dealers for signs, parts, dealer upgrades and more, as well as offer them the right of first refusal for any new area dealerships.

Arbitration between culled dealers and GM and Chrysler is ongoing, having been mandated by congress, and it’s already creating friction, particularly for Chrysler. But federally-mandated arbitration will only accomplish so much, if states like Colorado continue to push back for local culled dealers. Dealers are protected on the state level by franchise laws that vary significantly from state to state, and if local legislators (who are much more easily persuaded by the pleas and donations of local dealers) dig in and fight, GM and Chrysler’s dealer culls could become hopelessly mired in the kind of compensation negotiations that collectively earned Oldsmobile dealers about $1b when that brand and its dealers were wound down.

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30 Comments on “GM Fighting Colorado Culled-Dealer Bill...”

  • avatar

    I like this guy.

  • avatar

    He keeps saying that GM has used bankruptcy as a way of not honoring the dealers’ contracts, by which I assume he means the franchise agreement.

    What contracts? Once bankruptcy occurs, there are no contracts. REPEAT: There are no contracts.

    Yet another reason why GM and Chrysler should have been allowed to use bankruptcy laws as they were written, without government intervention – which, by the way, was a bipartisan effort…so let’s keep the party-line mongering out of it.

    At the time of the bailouts people were saying that we were avoiding an enormous mess that would have occurred with a “normal” bankruptcy.

    I say we simply postponed the enormous mess. Only time will tell.

    • 0 avatar

      I say we simply postponed the enormous mess. Only time will tell.

      I think that was the intent. In the middle of a major credit crunch and economic contraction, the last thing anyone wanted** was to see an industry that powered a big chunk of consumer spending disappear. Bail-outs in general are an attempt to postpone problems until your economy is such that you can deal with them and, if the Lesser Two manage to snatch defeat from the jaws of corporate idiocracy, so much the better.

      If GM, for example, was lead by competent leadership, they would have declared bankruptcy around 2006 and emerged nice and lean for 2008. What they did do was wait until well past the last possible moment, and only with government arm-twisting agree to do the necessary thing.

  • avatar

    “don’t let special interests stick taxpayers in reverse”

    Lessee… that would be special interests like Government Motors, the UAW, the Democratic Party, rustbelt politicians, the Obama Administration, and the Washington bureaucracy. Seems like it’s too late to avoid these folks sticking it to the taxpayers.

    We’ll never get a dime back, but we can stop hundreds of billions of future dimes going down the Detroit rathole if we boycott GM and force Washington and its friends to close the doors.

    • 0 avatar

      I agree with you about the “Washington bureaucracy” part, but don’t overlook that both major parties are implicated in this mess. Trying to determine which side is “more to blame” is an exercise in futility, so I’d avoid any finger-pointing.

      I’m more disgusted with the fact that the parties have become irrelevant; what’s become more important is which special interest (in this case, business or labor) has the most powerful lobbists. And in this case both sides had every reason to demand a quick fix without regard to the long-term consequences.

      So please, don’t blame one administration or party. Both created this “legacy” that we’ll be paying for over many, many years.

    • 0 avatar
      Facebook User

      +1. Of course, your line of thinking hinges on the American public taking a principled stand against something very clearly wrong, which is never a safe bet… but here’s hoping this time we get it right and close Gov’t Motors down.

    • 0 avatar
      also Tom

      While we’re at it, let’s blame the UAW and the Democrats for every natural disaster going back to 1900. You also want me to boycott an American company bailed out with my tax dollars too, is that right? Um, I don’t think so. I can’t help but deduce that somehow khat is involved here, Parkit.

    • 0 avatar

      Actually, the only hope of getting some of the money back is for GM to have a successful IPO (notice, I didn’t say all). I am also not sure why you think the gov’t is going to give anymore to GM. I actually think that a boycott could trigger it. If people stopped buying GM and the gov’t thought its investment would be bad, they may put more money into it. I don’t see another scenario where GM would get more money from the gov’t.

      I fully understand not liking the bailout. But, I think the taxpayer’s best interest is to have GM be successful and get some money back through the IPO.

  • avatar

    There’s billions of bucks yearly for medical care for illegal aliens.

    Do a Web search.

    Transplants and kidney dialysis and drug-resistant tuberculosis treatments and baby delivery costs adds up to HUGE yearly sums.

    And that’s to keep the illegals alive and kicking to disrupt the supply/demand equation for jobs and housing and social services we pay for and that tilting the supply equation is especially harmful to America’s working-poor citizens.

    Plenty of funds for those who should not even be here but for assisting citizens?

    • 0 avatar

      Point taken on the illegal alien thing, but don’t expect many to be outraged…these are, after all, auto dealers we’re talking about.

      While I’m sure that many of those affected were good, hardworking businesspeople, the bad apples that lobbyists helped to protect have soured the public’s attitude toward the entire lot.

  • avatar

    As a colorado resident I hope this passes… It isnt right for GM or Chrysler to use bankruptcy laws to close down dealerships and then give the franchise to another person down the road… this has already happened to a dodge dealer in colorado.

  • avatar

    There’s no doubt GM had to do something about a too-large retail network established when it was actually successful, then locked into place by state franchise laws. GM had every right to reject dealer contracts in bankruptcy, and the Colorado legislation doesn’t seem to say otherwise.

    But when GM admits its dealer cull was done incorrectly, and goes back into markets it used bankruptcy to vacate, I have to agree with Senator John Morse: reappoint the old dealer or compensate him.

    GM’s clearly specious lobbying effort in this case is exactly what they’ve been doing for 40 years and it is why, when they needed the government’s help, they found they had no friends and no credibility.

    • 0 avatar

      I don’t disagree with you, JSF22, but I wonder if all of the effort is worth it on the part of the Colorado legislature.

      Right, fair or otherwise, our founding fathers felt that U.S. bankruptcy law was so important that they protected it from being trumped by states by placing it into the articles of the Constitution…and not even into the Bill of Rights.

      I wonder if such a move on the part of one state is even Constitutional.

  • avatar

    Speaking as a citizen of Colorado, I can tell you the dealer cuts in my area made perfect sense. When the local Chrysler/Dodge/Jeep dealer went tits up in June, he had numerous 2008 and 2007 cars on its lot, and even had two 2006s. The Chevy dealer was similarly inept. And in both cases, there were larger, better dealers for both brands within a 15 minute drive of my house.

    That probably doesn’t make the closures a less bitter pill to swallow for the owner of the dealerships, but in business, you either sink or swim, and these guys weren’t swimming.

  • avatar
    Mr Carpenter

    Not trying to harrass you personall, buzzdog, but here’s the facts as I see them.

    If bankruptcy law was so important as you say, which I am not disputing, then why did the Powers That Be simply re-write bankruptcy law for GM and Chrysler and nobody else?

    Because, that’s essentially what happened.

    Wish I could post photos on here. (Imagine the US constitution on a toilet roll, and you’ve got it).

    • 0 avatar

      “If bankruptcy law was so important as you say, which I am not disputing, then why did the Powers That Be simply re-write bankruptcy law for GM and Chrysler and nobody else?”

      Man, I wish Pch101 still posted here, because he did this so much better than I could hope to.

      The short version: the government didn’t “rewrite bankruptcy law”. They followed it. Precisely. The problem is that many of the bondholders, for no reason anyone could fathom, expected the government to ensure they were payed back 1:1 or better, which was insane, because if not for government floating GM and Chrysler those same creditors would have gotten nothing.

      Guaranteeing investments in corporate stocks and bonds is not generally the government’s job unless we’re talking about avoiding significant collapse that would affect the economy as a whole. The bondholders, if they wanted to be assured of 1:1 compensation, should have bought something FDIC/CDIC insured.

      Investing in, say, GM and Chrysler in the last ten years and not being proactive enough to either a) say something at shareholder meetings or b) get your funds into companies not so obvious bent on self-immolation is short-sighted in the extreme. I feel bad for those who lost money, but they got off far better than if the government didn’t step in at all and let these two face C7.

    • 0 avatar
      crash sled

      “The short version: the government didn’t “rewrite bankruptcy law”. They followed it. Precisely. The problem is that many of the bondholders, for no reason anyone could fathom, expected the government to ensure they were payed back 1:1 or better, which was insane, because if not for government floating GM and Chrysler those same creditors would have gotten nothing.”

      No, psar, the government did not appear to folow the law, and the fact that the UAW contract was vaulted above secured creditors seems proof enough of that.

      Now, if GM had been dismantled and sold at auction as in a true bankruptcy, and the profitable truck platforms purchased by, say, the Chicoms, requiring only a miniscule portion of their $1T +/- of dollar securities, this would likely add, oh, say $20-50B to the bankruptcy court’s bankruptcy kitty, which would be picking over the carcass of Old GM. The secured creditors would have been at the top of the pecking order for that kitty, in a true bankruptcy.

      So it isn’t quite correct to say the secured creditors would get nothing in a true bankruptcy. Government Motors was established to circumvent the above true bankruptcy.

    • 0 avatar

      @crash sled
      GM had ZERO secured debt, except for gov’t issued loans right before GM’s bankruptcy. Unsecured debt was not put in front of secured debt in this case. Many people forget to look at this when they talk about it.

      For Chrysler, they did it a bit differently. Chrysler’s creditors agreed to a plan, or at least 97% (I don’t remember the exact percentage), during the bankruptcy process. The few that didn’t had their day in court and lost.

      Bankruptcy law was followed in this case. There were a lot of internet rumors about how bankruptcy law wasn’t followed which are untrue.

    • 0 avatar
      crash sled

      I think you may be right, Steven. It’s hard to keep the players and finances straight, re the various subsidiaries of Government Motors.

      One thing seems clear though. The UAW contract retained primacy, and our tax dollars paid for that happenstance. In a true bankruptcy, this would not have occurred.

    • 0 avatar

      @crash sled:

      There are two kinds of business bankruptcy: C7 and C11. The kind of BK you’re talking about is C7, in which the business intends to shut down. In a C11, which is what Chrysler and GM did, the company’s debts are reorganized under court protection.

      Both are “true bankruptcies.” What you’re doing is arguing that GM should have gone out of business and been broken up and sold off piecemeal, while ignoring that the debts involved – some $150 BILLION – couldn’t possibly have been paid off doing that.

      So, in a breakup, you’d have the loss of a huge employer, the loss of hundreds of thousands of jobs, and no way for the lost capital and jobs to ever be gained. Plus, while it’s impossible to guarantee whether GM will ever pay back its government loans, I can tell you with 100% certainty that if they were broken up, those loans would have remained unpaid.

      At least now there’s an opportunity to make that happen.

    • 0 avatar
      crash sled

      Mike, the value of GM’s assets likely have a scrap value of at least $20B, not to mention the real estate value.

      I’d guess the profitable GM truck sales in any given year, say 1-2M vehicles per year, could lead to a yearly profit of as much as $20B per year, and the Chicom offer would arrive for that amount, at least.

      The rest of the vehicle programs would go similarly, if profitable. Perhaps figures approaching $100B would be thrown into the bankruptcy kitty, at the end of the day, to be distributed to the debtors, per their priority in the pecking order. This would go a long way to paying off the $150B figure you mention, at least. It sure ain’t ZERO, as you seem to be implying.

      The current UAW contract would go into the trash for all the buyers, of course, along with all past unfunded legacy costs, which is the biggest problem for GM and the rest as we know. But the UAW found some willing helpers, and Government Motors was born.

      We’ve lost thousands of jobs in the auto industry. You seem to be concerned about the few involved here. Thousands of jobs lost, many pensions and health care packages lost, by those not in the chosen few. This is inequitable. I know these people. This effects all of us, particularly here in SE Michigan. But we don’t get the largesse. Only the few get it. This is inequitable, clearly.

      There was another way… a clear path… and absent those legacy costs, private financing available to take that path. Government Motors put us on the wrong path, financially and otherwise. It indebts us all, to help the few.

  • avatar

    Interesting how the cause you’re advocating is never a “special interest”. Just like how the men with guns who you agree with are “freedom fighters” instead or terrorists, how you’re always a member of the “silent majority” and not the “vocal minority” and it’s never “propaganda” if you agree with it.

  • avatar
    Mr Carpenter

    I don’t know if you live in America but it’s almost a moot point, psarhjinian. Because it was “domestic terrorists” from 1775-1788 give-or-take, who made the United States possible. And the United States has made it possible for millions of folks all over the world to NOT have to live in abject terror of their own government.

    So why are you tearing me down, presumably for my saying over the months, that our own country is now going down the wrong path, and in fact, has chosen to do so many administrations ago?

    I suppose you’d have been mad at someone on the Titanic for telling you to go to the life rafts, when you hadn’t finished your party and dinner yet (after the ship hit the iceburg). Revellers were literally going out on deck and getting shavings of ice for their drinks…

    As for what I’m presuming you are referring to, the islamic “freedom fighters” that the world is fighting right now, what if I really blow your mind and give you a truth you may not have ever heard before. Islam isn’t so much a religion, it is a political system disguised as a religion. There isn’t any other religion on earth which so consistently demands the destruction of non-adherents as Islam.

    The world is absolutely full of lies, psarhjinian. That statement is an absolute truth.

    There is also the absolute real truth. But this isn’t the place to go into that. But I’ll give you a hint. Time is literally running out. Free will being what it is, it’s our responsibility to figure it out and take our own life decisions then live with the consequences.

    This should give you a hint as to why I’m not afraid to speak up when I see wrong-doing of any kind. Am I perfect? Not even close. But neither are you or anyone else.

    • 0 avatar

      Whoa, whoa, whoa.

      What I was objecting to was the language of the press-releases above. I don’t like weasel-words like “special interests”, used with the intent of cutting the other side’s relative moral standing down. I think it’s particularly galling to see General Motors, which is very much a “special interest” trying to use that language.

      I’m going to take a hands-off approach to the rest of your comment. I do think the moral take on a lot of what we hold dear really does depend on what side of the language you’re on.

      As for bankruptcy law: we’ll, them’s the breaks. Government had a choice to make: either take a completely hands-off approach and potentially watch the economy go down in flames, or intervene and put the pain off until it won’t hurt so much. Neither choice is significantly more “moral” than the other, they’re just ideologically different. But they did follow the letter of the law.

      We can second-guess after the fact. Most democratic nations have the freedom to “vote the bums out” in favour of different, less interventionist bums at a later date. None of this is indicative of a general moral failure of society. Pick any point in history and you’ll generally find people complaining that they’ve been on the wrong path. People are like that: we tend to see a golden era behind us and the Fall Of Rome up the road. The point is that everyone thinks that it was always better and is always getting worse, no matter how old they are.

      If you think about this logically, we must either be completely degenerate by now, or we simply lack historical perspective. I’d say the latter is probably the case.

    • 0 avatar

      @Mr. Carpenter:

      You make a huge mistake calling the Continental Army during the revolution “domestic terrorists”. They conducted their war the proper way: against the enemy’s army, NOT against the enemy’s innocent civilians. The latter is terrorism.

  • avatar
    Mr Carpenter

    Sorry, buddy, didn’t mean to misconstrue what you were saying. That’s the problem with not being face to face and trying to fathom the intent of words written from one’s own perspective. Apologies and thanks for not taking it personally, which wasn’t ever the intent.

    Yes you have some very valid points. Naturally enough, you can understand that from the perspective of many of us, the USA isn’t the place it used to be (and never was). Hindsight seems to always have rose colored glasses attached?

    But that aside, it can easily be seen that the entire world – not just the US – is a what could almost be described as a perfect storm in so many ways…. we sure have our work cut out for us, and shouldn’t give up the ship / head to the hills with our rifles & bug-out-bags just yet… (and at my middle age, I frankly wouldn’t survive such a scenario anyway – best to leave the Mad Max lifestye to the younger set if sillyvization collapses)!

  • avatar

    Something else to remember when it comes to the failures of GM is that they have been working on their failure for decades.

    this is from wikipedia (which I know is not 100% on target, but it can be varified if questioned)
    “General Motors was financially vulnerable before the automotive industry crisis of 2008-2009. It came close to insolvency and bankruptcy after falling sales caused a US$4.45 billion loss in 1991.[citation needed] Cost-cutting and management changes restored profitability for the next 10 years.[citation needed] In 2005 the company posted a loss of US$10.6 billion.[15] In 2006, its attempts to obtain U.S. government financing to support its pension liabilities and also to form commercial alliances with Nissan and Renault failed. For fiscal year 2007, GM’s losses for the year were US$38.7 billion,[16] and sales for the following year dropped by 45%”

    GM knew they were failing, they continued the same path, they refused to improve.. had they corrected their issues way back when they would not be in he situation they are in now. (One huge error was creating Saturn)..

    They also constantly make the same mistake 2, 3 or more times and simply labeled it under other names.. Chevy (former) Pontiac, GM, (former) Saturn, (former) Oldsmobile, Buick.. etc.. there is so much redundancy.. if they could try and focus on one car correctly that would make a HUGE difference.

    I feel for the dealers, I feel for the plants.. I do not like to see or want for anyone to lose jobs, and especially right now, in this economy. If GM is successful (and they likely will be) in cutting the dealers they targetted to cut, I hope for those dealers to simply select a better auto company to support & sell (and that really is not a stretch). If I was one of those dealers I would not want to continue to sell/support vehicles from such an awful company.

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