Threatened G.M. and Chrysler Dealers Win a Round in the House

For Immediate Release:

December 11, 2009

Contact:BERNIE BECKER

New York Times

WASHINGTON — The House approved legislation on Thursday that would grant Chrysler and General Motors dealerships the right to challenge the companies’ decisions to close them in third-party arbitration.

The provision was part of a spending bill that passed 221 to 202 and is now headed to the Senate. No Republicans in the House voted for the bill.

Under the legislation, 2,000 or so car dealers that have already lost their franchises or are scheduled to lose them would be allowed to enter binding arbitration. A neutral arbitrator would decide whether to restore the dealer’s franchise agreement. Among factors to be considered in the decision are the profitability of the franchise from 2006 to 2009, how long the dealer has been in business and the dealer’s current economic viability.

The provision was announced this week by Representative Steny H. Hoyer, the House majority leader, and Senator Richard J. Durbin of Illinois, the No. 2 Democrat in the Senate.

Lawmakers in both parties, especially the House, have expressed their support for car dealers since Chrysler and G.M. announced plans earlier this year to shut many operations.

G.M. and Chrysler announced last week that they would re-evaluate the closings, offering either reviews that would result either in the dealers having their franchise agreements restored or being offered arbitration. At a conference call on Thursday joined by other Democratic supporters of the dealers, Mr. Hoyer declared that the companies’ plans did not go far enough, suggesting that Chrysler and G.M. would have decided whether they had fairly used their own criteria in closing dealerships.

The arbitration provision in the legislation, said Mr. Hoyer, Democrat of Maryland, was “fair to the dealers and fair to the companies.”

This week, after the compromise provision was announced, both auto companies released statements indicating they were interested in working with lawmakers and dealers to find a resolution that balances the interests of both sides.

On the Republicans’ side on Thursday, the House minority leader, John A. Boehner, gave qualified support to the auto dealer provision, even as he was critical of the spending measure as a whole and voted against the bill.

“I don’t think it’s quite as much as I’d have hoped, but it’s something.” Mr. Boehner, an Ohio Republican, said in a news conference. “And I hope it does resolve some of the unfair closings that I and many of my colleagues on both sides of the aisle have witnessed.”

Groups backing the auto dealers, like the Committee to Restore Dealer Rights and the National Automobile Dealers Association, praised the House vote.

The House had voted in July to restore the franchise agreements for the Chrysler and G.M. dealers facing closure. The White House opposed that provision, saying the companies’ move to a leaner dealer network was a crucial part of their reorganization. The federal government provided bailout aid to both companies, giving it ownership stakes in each.

In June, Chrysler, now allied with Fiat, closed almost 800 dealerships, or roughly a quarter of its dealer network.

G.M. informed more than 1,000 of its dealers earlier this year that their franchise agreements would not be renewed when they expired in October 2010.

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