GM and Chrysler on Capitol Hill

GM's Chief Executive Fritz Henderson and Chrysler's President Jim Press were hauled in front of the Senate Commerce Committee today to defend the closure of their dealerships. GM now says it will close nearly 1,600 dealerships in the next 18 months, and by the end of 2010 wants to reduce the number of dealerships from the current 6,300 to 3,800 or less (40% or more reduction). Chrysler wants to shut down 789 dealerships by June 9 (25% of total Chrysler dealerships, in 5 days) and wants to end up with 2,392 dealerships.

The chairman of the committee, Democratic Senator John Rockefeller of New York, said in his opening statement:

"I don't believe that companies should be allowed to take taxpayer funds for a bailout and then leave it to local dealers and their customers to fend for themselves with no real plan, no real notice and no real help, that is just plain wrong, you don't do that."

The dealers slated to be eliminated as well as chairman of the National Automobile Dealers Association were also at the hearing.

So what would be the solution to right this wrong? More government help?

Curiously absent from today's hearing were the Presidential Auto Task Force - members, official designees, or the staff (one of whose influential voice is a 31-year old ex-campaign aide) - who crafted these two bankruptcies. At least they were not at the table with the automaker CEOs and dealers, being grilled by the Senators. Both GM's Henderson and Chrysler's Press seemed to be doing their best to present the case on behalf of the Auto Task Force. Mr. Henderson seemed to have rehearsed better than Mr. Press, who at times seemed lost for words.

You can watch the entire 3-hour hearing yourself, here.

Some Senators in the Committee were grumbling that there had been hardly any Congressional oversight. According to a largely ignored piece of news ("Lawmakers Blast GM Restructuring:
Obama's Auto Task Force Is Accused Of Treating Investors, Dealers Unfairly", 5/23/09 Washington Post), there was a last-ditch effort by some members of Congress (both Republican and Democrat) to take the role of restructuring back to Congress from the ad hoc Task Force set up by the President.

Belatedly, the Senate Banking Committee (chaired by Chris Dodd) said on Wednesday that it will hold a hearing on June 10 to examine the role of the Presidential Auto Task Force (see Reuters update). Better late than never. But will it be just a rubber-stamping and rolling-over exercise? Don't hold your breath, as the White House Press Secretary has already delineated the role of Congress (not much) in the matter of auto bailout (read it in my post here).

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