Dealers Aren't to Blame

Reorganizing GM, Chrysler needs cost-benefit analysis, oversight

Editor’s note: The following commentary was published on the editorial pages of USA Today on June 11, 2009.

By John McEleney

With a total lack of public transparency or justification, the White House auto task force — an unelected panel of advisers with no automotive experience — told General Motors and Chrysler on March 30 that they needed to move more aggressively to cut "an excess of dealers."

There was no cost-benefit analysis. There was no recourse. There was no fair and equitable treatment of auto dealers whose businesses collectively employ 1 million people and each year generate billions of dollars in sales tax revenue that's essential to the economic health of just about every local community in the country.

Instead, 789 Chrysler dealers were given a 26-day notice, and about 2,000 GM dealers have until October of next year to wind down their businesses, putting more than 100,000 jobs at risk, in communities throughout the country. To make matters worse, many of these terminated dealerships are profitable businesses.

And for what?

Accelerated dealer closings are not necessary for the future viability of either GM or Chrysler. Closing dealerships results in a loss of revenue for automakers without any real cost savings.

Dealers are not the problem. They are not cost centers for the automakers. On the contrary, dealers are the primary source of revenue for automakers; they are the automakers' customer; they purchase the automakers' vehicles and parts and even the signs in front of their stores.

But why should Congress care? Regardless of the question of dealer closings, Congress will and should be involved. More than $80 billion of federal money will be going to GM and Chrysler, with no one yet able to explain exactly how the money is to be spent. Taxpayers will soon own 60% of GM. If there ever was a situation that cries out for congressional oversight and action, this is it.

This is not about micromanagement. There are larger questions here. Congress should address the fundamental fairness of the process and restore the economic rights of dealers that are contained in franchise laws in every state in the country.

John McEleney is chairman of the National Automobile Dealers Association and a dealer in Iowa for GM, Toyota and Hyundai.