WASHINGTON, D.C. – Today U.S. Senator Kay Bailey Hutchison, Texas ’ senior Senator and Ranking Member on the Senate Committee on Commerce, Science and Transportation, delivered the following remarks on the Senate Floor about the Chrysler and GM automotive dealership situation.

“…I rise today to speak about the update on the Chrysler and GM. bankruptcies and their impact on the automobile industry. I offered an amendment to provide at least 60 days for any dealer being terminated by an auto manufacturer receiving TARP funding to wind down its operations and sell its inventory. My amendment was in response to the letter sent to 789 Chrysler dealers, May 13th, 2009, informing them that they were being terminated on June the 9th – three weeks later, with no assistance for auto inventory, parts, or special tools. I found that unacceptable. 

 “And, you know, a number of the people who heard my amendment on the floor stepped up and said. “I want to cosponsor that amendment.” By the end of the day we had 38 bipartisan cosponsors on the amendment to give these valued members of our communities at least 60 days to wind down their businesses. As a result of that amendment and thorough discussions with Chrysler president Jim Press, Chrysler responded with a commitment to facilitate the transfer of inventory and parts for the terminated dealers.

“As soon as we returned from Memorial Day recess, Chairman Rockefeller and I called a Commerce Committee hearing specifically on the impact of the Chrysler and GM bankruptcies on the auto dealer community. This hearing provided the first outlet for dealers to express their opinion on how they were being treated in this process and it gave Chrysler and GM CEOs an opportunity to explain their reason for the termination of literally thousands of dealerships across the country. We pressed the auto manufacturer executives to reconsidering how they were treating these independent businessmen and women and we sought progress reports on their commitments to me, our committee, and this body to provide a softer landing for terminated dealerships.

“In response to the concerns we raised in that hearing, Chrysler did take another step forward on behalf of their terminated dealers by formally guaranteeing every piece of inventory at these dealerships would be purchased at cost minus inspection and transportation fees. So they made the promise after the Memorial Day recess that they would buy every car. This reassuring news, of course, was welcomed to the dealer body. But we still had concerns. I continued to push Chrysler for assurances regarding parts and equipment.

“The Commerce Committee sought additional answers on transparency, dealer reentry, rural access, and continuation agreements from both Chrysler and General Motors. On Monday I received a letter that I thought was very positive from Chrysler acknowledging the need for assurances on parts and they have now guaranteed 100% of the parts inventory for terminated dealers. So we have a situation where they did listen. They eventually said they would buy all of the cars that were still left in inventory and now, of course, they're going to buy the parts. Of course the dealers that were being terminated had no use for the parts which they had already purchased, so that was a fair, I think, ending to that dilemma.

 “I also want to point out another part of the answer to the Commerce Committee letter which is on dealer terminations and market reentry. Because one of the things that came out in our hearing is that in some places all of the dealerships in the area were being closed. And, yet, we had word that there were new people coming in seeking financing for a new dealership in the same place. Now, that didn't quite ring right with us and so we did ask for assurances that any dealer that was terminated would have some ability to come back in if another dealership was going to be put in that area. And here is what Mr. Press said in the letter of June 12th, 2009: "Chrysler Group LLC will commit to provide non-retained dealers with an opportunity for first consideration of new dealerships that the company may contemplate." 

 “Now, we sent the same request for information to the General Motors CEO, and his answer was: ‘You've asked about situations where GM will authorize the establishment of a new dealership near the location where a current profitable dealer has been asked to wind down operations. It is not our plan for current dealerships to be wound down only to open up new dealerships. Rather our plan is to reduce overall dealer count. However, in those rare instances where we do open a new dealership in an area previously served by a winding down dealer, we commit to provide advanced notice to former dealers and allow them an advanced opportunity to apply to run the new dealership.’

“Now, I think that is a step in the right direction, and I hope that that will be followed through on in a legitimate and positive way. Because it would be the most cruel cut for a dealer who has been closed, a dealer that is profitable to all of a sudden have a new dealer come in and open on the same ground or in the same area as the dealer who was closed at great loss. Because, remember, Madam President, that we have a dealer now with a huge piece of real estate. These auto dealerships are big lots because they have all of these cars on them. So they're big pieces of real estate. They're big buildings that are generally suited just for the purpose of an automobile showroom. And they have been left sort of stuck with this real estate. And stuck with all of the other equipment and things that you have to have to run a business, and I think it is untenable for us to just close that person down and then three months later all of a sudden have a new person come in without all of those expenses and have the opportunity to open a new dealership. So I thought that was a very important part of the letter and commitment that is being made. But, of course, the commitment has to be followed through with responsible advanced notice and a fair hearing for the dealer who has gone out of business to be able to come back in. So I do commend Chrysler for heeding the calls of Members of Congress and the dealer community and responding in a way that does give additional support to the dealers.

“General Motors, meanwhile, did sit down with the National Auto Dealers Association after our Commerce Committee hearing to work out concerns with the supplemental agreements continuing dealers were asked to sign. I commend GM for making concessions during those discussions, and I hope they will continue that positive dialogue and interaction as the GM dealer network seeks additional information, support, and assistance. Madam President, I will continue to work with the auto manufacturers to provide our dealer communities with the support and assistance they need in this very challenging time.

“I am worried about what is happening to many communities in my state and all over American communities. They are very community oriented, they advertise, they support the little league, they support the united way, they support the -- the high school football programs. They're community citizens and they're always the first one to step up when the community needs something. So closing these dealerships, especially where it's the only dealership in town, especially when it's profitable, has been stated to be necessary.

“But the dealer takes all the risk. They buy the cars, they buy the parts, they buy the special equipment, they have the real estate costs. They take the risk, not the manufacturers. So I am not convinced that cutting down on the number of dealerships is really the most productive thing for this economy today. We're trying to keep jobs. We're trying to keep communities going. We're trying to keep our economy steady and growing, and why we're closing down dealers and putting people out of jobs when they are profitable and contributing to the community is, frankly, lost on me. And, in fact, I asked Mr. Ron Bloom, who was a member of the auto task force at a Banking Committee hearing after the Commerce Committee hearing. I said, “Why did the task force ask both GM and Chrysler to go back to the drawing board and eliminate more dealerships than their original plan?” He acknowledged that they did this. And, again, gave us the argument that fewer dealerships will be better for sales of these cars and trucks. I still, I'm honest to admit, still do not understand why he believes that, or Mr. Bloom, or the auto task force, or GM or Chrysler believe that when the dealers take the risk and they're profitable, that it will increase sales to eliminate those dealerships.

“And I certainly don't understand how the task force, which is part of the White House, would not see that this is going to hurt profit in the long run. Putting people out of jobs. Thousands of people out of jobs. It just is counterintuitive to me. However, it is being done and all we're really trying to do is help the people who are being shut down to have the first rights to new dealerships that would open and to make sure that they are treated as fairly as possible. You cannot say it's fair, because getting three weeks' notice to shut down an auto dealership is just not fair. GM has given a longer time period, but at the same time that the GM company is saying you will have until next year, 2010, to shut down your dealerships, yet the ones who have gotten the notice that they're going to be closed under GM are being told they can't buy any new cars to sell. So they can wind down the inventory that they have but they can't stay in business until 2010 if they can't get access to new automobiles and parts. So it doesn't seem like that's going to really work very well either. So I'm hoping that GM is going to also be a little more responsible in trying to help those being closed with some ability to wind down in a more constructive way. So as we continue these discussions between the dealer community and the auto manufacturers, I certainly hope that we will be able to keep track of the progress.

“And I would like to continue to get the progress reports, to see how these automobile companies are doing, and to get input from the dealers, because it has been a very tough blow to them, especially those who didn't see it coming because they were profitable. Or like one of my constituents who had a profitable dealership in a location in Galveston county for years and years and years, and then he was told that he was going to be closed, even though he has dealerships in other parts of the Houston area, he was being closed in Galveston County. And, of course, Galveston was struck by a terrible hurricane, Ike, last year and his business was down in the Galveston county location. That is not surprising. Many people have not been able to move back to Galveston County because their homes were destroyed and they have no ability to live in Galveston County anymore. So there was at least until very recently no opportunity for my constituent to appeal to General Motors because they were going to lose all their rights if they feel any of the concessions that were being made to closing dealers. 

 “So it's a very troubling situation. I think we are making progress. I think GM and Chrysler are doing better with regard to the dealers, and I hope they will continue to understand these important parts of communities all over America, these franchises that they have put out, they have been encouraged to try to buy inventories, to help the companies not to go into bankruptcy, and then when they did go into bankruptcy, they were sort of left high and dry. I think and it's our responsibility, particularly in the case of GM and Chrysler because they're getting taxpayer dollars, that they should have a little more concern about the overall economy because it's tax dollars that are propping them up. So, Madame President, I ask unanimous consent that the letters that Senator Rockefeller and I received from Mr. Henderson and Mr. Press, GM and Chrysler respectively, would be made a part of the Congressional Record along with my statement.

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RESOURCES

VIDEO:          Senator Hutchison’s Update on Senate Floor About Chrysler/GM Automotive Dealers

TIMELINE OF SENATOR HUTCHISON’S EFFORTS FOR AUTO DEALERS:

May 13, 2009

Chrysler sent letter to dealers informing them of their termination.

May 21, 2009

Senator Hutchison offered amendment to emergency Supplemental Appropriations Bill that stated, “No funds shall be expended from the Treasury to an auto manufacturer which has notified a dealership that it will be terminated without providing at least 60 days for that dealership to wind down its operations and sell its inventory.”

Senator Hutchison’s amendment got thirty-nine bipartisan co-sponsors.

At the close of debate, Senator Hutchison refused to yield back time, effectively holding up final vote of the Supplemental Appropriations Bill until Chrysler President and CEO William Press assured her that Chrysler was taking the appropriate measures to help automotive dealers across the country.

Ultimately, Mr. Press promised in this letter to work with rejected dealers to move inventory.

Senator Hutchison then announced on the U.S. Senate floor that the Senate Committee on Commerce, Science and Transportation intended to hold a hearing on GM and Chrysler’s termination of franchise agreements nationwide.

May 22, 2009
Senators Rockefeller and Hutchison, Chairman and Ranking Member of the Senate Committee on Commerce, Science, and Transportation respectively, sent Chrysler CEO Robert Nardelli and GM CEO Fritz Henderson a letter informing them of their intent to hold a hearing focusing on their companies’ termination of franchise agreements and its impact on consumers and automotive dealers.

June 3, 2009
Senate Committee on Commerce, Science and Transportation held hearing on GM and Chrysler down sizing.

Senator Hutchison questioned Mr. Press about dealership closures at hearing.

Statement from Senator Hutchison on GM and Chrysler dealership closures.

June 15, 2009
In a letter to Senator Hutchison, Mr. Press outlined Chrysler’s steps to protect auto dealers forced to close under the company’s new business strategy.

Senator Hutchison said she will continue to work with all involved parties to make sure each impacted dealer has access to the resources they need.