Spurned Car Dealers Get New Life in The House

What the bankruptcy courts have decreed let no man tear asunder. But don’t try selling that to the House of Representatives.

Recall, if you will, that amid much gnashing of teeth, the government prevailed upon the bankruptcy courts to permit GM and Chrysler unilaterally void hundreds of dealer franchise agreements. The argument in favor of this move, though never so far as I have seen backed up by any solid data, was that this was a vital piece of the plan for the two to emerge from bankruptcy in fighting trim.

The dealers themselves fought a half-hearted battle, I suspect because they realized early on that the deck was stacked. These guys aren’t, however, without some clout. A lot of them are family businesses on the second or third generation of owners, employ a lot of people and have been playing games with and giving money to politicians for a long, long time. They know that there is more than one way to get what you want and they now might be waging the war they planned all along.

The New York Times reports the results of the first skirmish:

The House approved a spending bill on Thursday that would impede efforts by General Motors and Chrysler to close thousands of their dealerships.

The appropriations bill, which will finance the Treasury Department and other parts of the government, passed 219 to 208. It includes a provision that would force Chrysler and G.M., both of which are partly owned by the government, to restore franchise agreements for dealers facing closure.

The dealers have enjoyed broad bipartisan support in the House for weeks, with leaders from both parties, including the majority leader, Steny H. Hoyer of Maryland, standing behind them.

On Thursday, John A. Boehner of Ohio, the House minority leader, said at a news conference that he “never understood how cutting car dealerships reduces costs for the auto companies.”

“These people paid serious money for these dealerships,” he added. “They’ve got a big investment there in real estate, and all of a sudden they’re out of business.”

The Obama administration, recognizing a travesty in the making, has already started pushing back. They issued a statement saying the provision would “… set a dangerous precedent.” I think that’s code for we don’t want this landing on the President’s desk. Harry Reid says that helping these guys isn’t high on his agenda, which I think is more code for we will leave this out of our spending bill and fight about it when we reconcile the bill.

I suspect the plan is to let this die a quiet death somewhere behind the scenes. Nice plan, but they may be underestimating the car dealers. They’ve got clout, money and sympathy on their side. The Obamites are painting themselves into the friend of big business corner and if they have to publicly go to bat against this one it won’t help that image.

I wouldn’t count these guys out yet. They’re smart enough to have picked my pockets pretty well over the years.

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About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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