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GM Has Reversed 11 Dealer Closings -- So Far

UPDATED at 5:47 p.m.:

The heads of GM and Chrysler are defending their bankruptcy-related dealer closings before the Senate Commerce committee underway now.

GM chief executive Fritz Henderson said moments ago that his company has received appeals from about 500 dealers targeted for shutdown.

So far, Henderson said, GM has agreed to 11 of the appeals, meaning those dealers can stay in business. Henderson said that GM is continuing to review appeals.

Moments before, it was revealed that GM and Chrysler and still charging dealers for training and tests -- even dealers that have been told they are being shut down, two dealers said at today's hearing.

Pete Lopez, a Chrysler and GM dealer in W.Va., said that he paid the automakers $480 this month so one of his mechanics could take a computerized test -- even though Lopez is supposed to shut down in days.

Russell Aubrey Whatley III, a Texas Chrysler/Dodge/Jeep dealer, said, with irony: "I just paid $200 for sales training -- and I'm not even a dealer" anymore, provoking laughter in the hearing room.

UPDATE: Sen. Bill Nelson (D-Fla.) just wrapped up a nice little stemwinder, basically asking the heads of GM and Chrysler why they have together received and will receive a total of $116 billion in taxpayer bailout money and auto workers are still losing their jobs.

It was fine rhetoric, but of course it's a false choice: GM and Chrysler are using the money to pay off their losses over the past year -- to dig themselves out of the hole. Cutting jobs is part of the cost-savings required to dig out of that hole.

Nelson, who admitted to committee chairman Sen. Jay Rockefeller (D-W.Va.) that he gets "a little worked up," accused the automakers of resisting innovation for years.

Apparently, he got so worked up, he got a little tongue-tied: Congress has long asked the automakers to "revolutionize the transportation system of personal people," he said.

GM, Chrysler Detail Claimed Cost Savings Of Dealer Closings

4:30 p.m.: GM and Chrysler have said they would save an unspecified amount of money by closing dealerships, but moments ago detailed just how much.

GM chief executive Fritz Henderson said that it costs GM about $1,000 in distribution charges for each new car it makes. By closing the dealers, GM can lower than amount to $900 per car. That may not seem like a lot, but multiplied by the millions of vehicles it manufactures, "that's a lot of money for us," Henderson said.

Chrysler president Jim Press said that by closing its Chrysler/Dodge/Jeep dealerships, the company will save at least $200 million per year in marketing and advertising and $41,000 per dealer in costs of simply dealing with that dealer, in addition to other savings.

W.Va. Auto Dealer Makes House Calls For Little Old Ladies

4:11 p.m.: A Chrysler and GM car dealer from little Spencer, W.Va., named Pete Lopez still makes house calls for little old ladies, he testified moments ago. If he is forced to shut down his dealerships, as GM and Chrysler want, Lopez's senior citizen customers will be hit the hardest, he said. (W.Va. residents have among the highest average age of all states.)

Lopez is the star witness of committee chairman Sen. Jay Rockefeller (D-W.Va.) and is the face he is trying to put on the hundreds of dealer closings mandated by GM and Chrysler.

Lopez admitted that as a small, rural dealer, his sales aren't big: Last year, between his Chrysler/Dodge/Jeep and Chevy/Pontiac/Buick dealerships, he sold only a little over 100 vehicles last year.

But because of his rural location -- about an hour-and-a-half drive from state capital Charleston -- his elderly customers will have nowhere to go.

This will happen "if they take away my dealerships," Lopez said, nodding his head toward his fellow witnesses seated to his right -- Chrysler president Jim Press and GM chief executive Fritz Henderson.

"I have one little old lady 79 years old, I love her dearly," Lopez said. "I pick up her car for service and take it back to her."

Lopez then invited the entire Commerce committee to come visit him in Spencer. Probably, he'd come pick them up.

UPDATE: Lopez just dumped on a fellow West Virginia dealer that he wouldn't name:

"In West Virginia, there's a dealership that sold 19 cars last year and he has his dealership in his front yard and they take" my dealership, Lopez said. "There's no rhyme or reason" to the closings.

Rockefeller asked Lopez if he could wind down his agency in 26 days, as Chrysler is requiring.

"No way," Lopez said.

Rockefeller then asked the same question of Chrysler's Jim Press.

Press didn't answer the way Rockefeller wanted, so he pressed Press: "I wish you would just answer my question.

Backed up against the wall, Press said, "I would have to find a way to achieve the shutdown required in the time period."

Brownback: Are Dealer Closings Really Necessary?

3:29 p.m.: Sen. Sam Brownback (R-Kan.) asked the GM and Chrysler brass if they really need to close hundreds of dealers if auto sales levels can return to anything near pre-recession levels.

Brownback noted that the U.S. auto industry is on pace now to sell just less than 10 million new vehicles this year. In a normal year, before the economic crisis, Americans bought about 14 million to 15 million vehicles from the Big Three.

Brownback has sponsored a "scrappage bill" that would give owners of older vehicles a credit toward the purchase of a new car if they turn in a vehicle that gets less than 18 mpg and is not more than 25 years old. The bill is designed to incentivize vehicle owners to buy new cars, stimulating the Big Three.

Interestingly, Brownback sponsored a similar scrappage bill in 2002 that he eventually withdrew, saying he didn't realize it would drive up the cost of spare parts for vehicle owners. Hot-rodders and antique car hobbyists opposed the bill, too.

Jay: Dealers Should Not Have To Fend For Themselves

2:36 p.m.: Each of the automakers is closing hundreds of dealers to trim costs and consolidate operations and GM chief executive Fritz Henderson and Chrysler president Jim Press can expect some tough questions.

"I don't believe companies should take money for a bailout and leave local companies to fend for themselves," said committee chairman Jay Rockefeller (D-W.Va.), citing the plight of a small dealer in the West Virginia town of Spencer. (Disclosure: West Virginia is The Ticker's home state.)

Dealers are opposing the shutdown, obviously, by pointing out that they are important employers in their towns, big charitable givers and (not least) newspaper advertisers.

Some have pointed out that they don't cost the automakers anything because they have to buy new cars from GM and Chrysler, providing revenue. That's true, but dealers also get a subsidy from the automakers.

Ranking committee member Sen. Kay Bailey Hutchison (R-Texas) has asked the automakers to give dealers more time to shut down and phase out.

Sen. Amy Klobucher (D-Minn.) wondered why there is not internal appeal process for the shuttered dealers.

-- Frank Ahrens
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By Frank Ahrens  |  June 3, 2009; 5:47 PM ET
Categories:  The Ticker  | Tags: Chrysler, Fritz Henderson, GM, Jay Rockefeller, Jim Press  
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i think there will be a few million very angry car owners when they find out that they will half go go way out of there way to get any work done to there cars. the dealers that are left will be swamped with thousands of car owners needing work done if they are not taken care of they wont be buying American made cars anymore

Posted by: getsix1 | June 3, 2009 9:23 PM | Report abuse

After watching the hearings on dealer closings, I was shocked at the boldface lies and illogical arguments given by both Chrysler and GM chief executives reasons for dealer closings. In fact I was so mad I freqently had to turn to another cable channel to stop to calm my sensibilities. Then at the end Sen. Rockefeller indicated that he was happy that everyone was so civil in their answers. What he told me with that outrageously glaring remark is that he is for anything that will not look like criticism for Obama's grab for industrial power over the big auto producers--basically politics at its lowest level. I am disgusted but having already contacted my two Virginia Senators who have not addressed my concerns with a more than nonspecific reply, I am fighting mad and trust me other voters are not far behind.
Ray O'Kelly, Midlothian, Va.

Posted by: rayok888 | June 4, 2009 7:42 AM | Report abuse

Is this the same destination charge that is passed on to the dealer that in turn winds up on the sticker that the consumer pays? The consumer is not the customer of the manufacturer, the dealer is. There is no reason to reduce the number of dealers, even if the dealer is losing money. Why do you deliberately want to cut your customer base. If the agreement is no longer equitable then you renegotiate the agreement. Unless they are wanting to do same process as one of the popular sub chains does. Make the first franchisee eat the cost and go bankrupt the sell it to the next franchisee with a fresh set of cars.

Posted by: Unbelievable4 | June 10, 2009 11:06 PM | Report abuse

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