Businessmen, Senators Concerned by US Car Dealership Closures

By Kate Woodsome

Washington
04 June 2009

Two of the biggest automakers in the United States plan to close thousands of dealerships nationwide to cut costs. Car dealers and members of Congress are worried about the impact on local communities.

Mechanics wearing grey work suits with their names stitched onto their pockets make repairs on a row of cars. The team at the Fitzgerald Auto Mall in Rockville, Maryland is on the front-lines of the battle to save America's car industry.

The dealership is losing its cars and trucks made by the U.S. automaker Chrysler. It is one of 789 Chrysler franchises nationwide being forced to close by June 9 because of a restructuring plan aimed to cut costs.

The Fitzgerald Auto Mall is staying open because it also sells foreign-made cars. Owner Jack Fitzgerald says Chrysler customers can still go there for repairs. "I'm telling customers that I'm going to stay open and take care of their cars. That's what I'm telling them," he said.

Not all dealerships are as fortunate. Many showrooms that only carry Chrysler brands will be forced to close. General Motors, once the world's biggest automaker, also plans to close about 2,500 dealerships by the end of next year.

Both companies have declared bankruptcy after failing to recover from a drastic drop in auto sales.

A U.S. Senate committee held a hearing Wednesday on the planned cuts and the tens of thousands of jobs that could be lost. In the packed chamber, the GM and Chrysler executives sat side by side with dealers.

Senator Olympia Snowe criticized the executives for taking government aid and then leaving customers and dealers without any support. "The American taxpayers provided billions of dollars, and ultimately, the auto dealers are on the frontlines with the harsh consequences of the failure at the top," she said.

The GM and Chrysler executives defended their decisions. "This has been the most difficult business decision I've ever personally had to take. The decisions had to be made. They were gut-wrenching, but absolutely necessary for Chrysler's survival," said James Press, the president of Chrysler.

But many people at the hearing and in dealerships across the country are unconvinced.

John McEleney, the chairman of the National Automobile Dealers Association, says the reductions will not help cut costs. "Over 90 percent of Chrysler and GM's revenue comes from the dealer, because the dealer buys the cars, the parts, and even the dealership signs from the manufacturer?Dealer cuts won't save any money because dealers don't cost the manufacturers any money," he said.

Chrysler and GM are under pressure from senators to provide greater support for the dealerships that are facing closure with parking lots full of unsold cars.

The manufacturers say they are trying to help dealers, but the justice local business people are seeking may only be found in bankruptcy court. Many are challenging GM and Chrysler's decision to take their cars off the road.