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Hearing Addresses Dealer Closings

General Motors and Chrysler have both entered Chapter 11 and exited as reorganized, debt-free new companies.

But that hasn't stopped Congress from holding hearings.

Today the House Judiciary Committee has summoned Treasury adviser Ron Bloom for a second hearing on the ramifications of auto-industry bankruptcies.

Dealer closings are once again the driving force behind lawmakers' concern. Legislation that would reinstate more than 2,000 GM and Chrysler dealerships slated for closure has rapidly gained bipartisan support on the Hill.

Rep. Bill Delahunt (D-Mass.) said he wants to see more transparency and a "fair measure of justice for the auto dealers."

Rep. Steve Cohen (D-Tenn.) is peppering Bloom on unfairly wiping out minority dealers.

But Bloom is emphasizing that cuts to the retail network are vital to the automakers' future success.

"It is important to recognize what would have happened if the president had not stepped forward," he said. "These companies would have been liquidated and all of their dealer franchise agreements would have been terminated."

The administration "strongly opposes" the bill to restore prior GM and Chrysler franchise agreements.

"The decision to invest taxpayer dollars into these companies required all stakeholders to make difficult sacrifices, and at this point it would set a dangerous precedent, potentially raising enormous legal concerns, to say nothing of the substantial financial burden it would place on the companies, to intervene into a completed portion of a judicial bankruptcy proceeding on behalf of one particular group," Bloom testified. "Political intervention of this nature could also jeopardize taxpayer returns by making it far more difficult for the companies to access private capital markets if there is ongoing uncertainty about whether Congress will intervene to overturn judicially approved business decisions anytime that it disagrees with the judgments of the companies."

--Kendra Marr

By Terri Rupar  |  July 21, 2009; 12:15 PM ET
Categories:  The Ticker  
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Next: Airlines' Tough Earnings Day


Debt free?
GM still has billions in debt, including debt owed to the U.S. Treasury.

Posted by: lougy | July 21, 2009 2:39 PM | Report abuse

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