UPDATE:GM, Chrysler Executives Back In Congress To Defend Dealer Cuts
12 Juni 2009 - 5:16PM
Dow Jones News
Top executives at General Motors Corp. (GMGMQ) and Chrysler LLC
appeared in Congress for the second time in two weeks Friday to
defend plans to cut dealers from their retail networks, dismissing
criticism from lawmakers that they have treated the dealers
unfairly.
"A strong dealer body is vital to GM's success," GM Chief
Executive Frederick "Fritz" Henderson said in prepared remarks
before the House Energy and Commerce Committee's subcommittee on
oversight and investigations.
He said the planned closing of nearly 2,600 dealerships by fall
2010 will save the company $2 billion annually.
Henderson said GM currently has 6,000 dealerships compared to
1,240 for Toyota Motor Corp. (TM). A large dealer network forces
dealers of the same brands to compete against each other, he said,
often forcing them to reduce prices on GM vehicles, eroding the
cars' "residual" value.
Also scheduled to testify Friday were Chrysler LLC President
James Press, John McEleney, chairman of the National Automobile
Dealers Association, and individual dealers. Chrysler closed nearly
800 dealerships this month.
Lawmakers voiced skepticism of the rationale behind the dealer
closings.
"I can think of few subjects that have brought the ire of so
many members" of Congress as the dealer closings, said Rep. Bart
Stupak, D-Mich., chairman of the subcommittee.
"How is it pro-customer to reduce competition?" asked Rep. Greg
Walden, R-Ore.
Walden said that the planned closing of a GM dealership in
Oregon will force residents to travel 136 miles to the nearest GM
dealership for service.
-By Josh Mitchell, Dow Jones Newswires; 202-862-6637;
joshua.mitchell@dowjones.com