GM asks surviving dealers to oppose restoring franchise agreements

Jul 17, 2009 (The Washington Times - McClatchy-Tribune Information Services via COMTEX) -- GMCEQ | Quote | Chart | News | PowerRating -- An arm of General Motors Corp. has asked surviving GM dealers to put in writing their opposition to bipartisan legislation that would restore franchise agreements to dealers that received pink slips from the government earlier this year, a demand that sparked accusations of "coercion" from one of the bill's chief proponents.

The bill has momentum on Capitol Hill, but is not supported by President Obama's White House, which has said reversing the closings would set a "dangerous precedent, potentially raising legal concerns, to intervene into a closed judicial bankruptcy proceeding on behalf of one particular group at this point."

In a July 6 letter obtained by The Washington Times, the GM National Dealership Council's Chairman Duane Paddock said the Council "strongly opposes this bill" and "would appreciate your signature of support at the bottom where it is designated." It requested recipients to fax the signed letter by 5 p.m. the next day to the NDC.

"It is extremely important you do this immediately. Our voices need to be heard," the letter stated.

Sen. Charles E. Grassley, Iowa Republican and author of the legislation in question, said the letter amounts to intimidation on behalf of the NDC.

He demanded in a letter to GM executives: "I would like to know if and how GM will react to individual dealerships if they decide not to sign the letter in opposition to these bills."

"Can you assure me and the hundreds of dealers who employ thousands of workers that you will not retaliate against them if they do not sign this letter or do not lobby against the bill on behalf of GM executives?" he asked.

GM issued an official response to Mr. Grassley that said, "GM's only involvement was to make our field personnel aware of the letter at the request of the NDC. Our field representatives were asked in the course of their normal interface with dealers to inquire if they read the letter and 'if they agreed with it' to sign it and return it. GM did not instruct or coerce dealers to sign the letter and I assure you there will be no retaliation."

Greg Martin, GM's Washington director of policy, said the company sees the bill as putting its current path "at risk" and stressed that the NDC operates independently of GM management.

"Not a single GM executive knows who signed" the letter, Mr. Martin told The Times.

Economics professors and students at the University of North Alabama have investigated the 789 Chrysler dealerships the Obama administration decided to close to see whether there was any truth to widespread reports that political leanings played a role in the shutterings.

They said historical precedent gave them reason to suspect political favoritism could be at play, mentioning that "during the Great Depression, New Deal dollars did not flow to where suffering was the greatest but instead to swing states that were most valuable to FDR's re-election strategy."

The researchers found several correlations, the most significant factor being that the higher the county's unemployment rate was, the more likely the dealership was to be closed. Because of this, the researchers wrote, "The Obama administration was extremely sensitive to the plight of big business but ignored the harm done to poorer communities when they lost a small business."

The number of Chrysler vehicles the dealer had on hand was also important. What wasn't considered, the researchers found, were the number of potential customers per dealership.

"But in the back of it all," said economics professor Jim Couch, "there's the variable that, as the vote in a particular county for Obama went up, those dealerships were more likely to remain open."

Mr. Couch said the study was done because of the significant amount of attention given to the closings and because "no one has done what we've done. Everybody has nibbled at the edges. I think we've got the best analysis in the country at this point on how the decision was made on which dealerships to close."

Rep. Michele Bachmann, Minnesota Republican, has been among the loudest critics of the Obama administration's handling of the auto industry, likening it to action by a "gangster government." The phrase is one that columnist Michael Barone used in a column earlier this year, which Mrs. Bachmann said was spot-on.

In a floor speech, she cited a GM letter asking its surviving dealers to oppose legislation that would restore franchise agreements with former dealers, as well a conversation she had with one former dealership owner in Minnesota who was put out of business by the takeover.

"Now GM is demanding that [the dealer] hand over her customer list, her service customer list, to GM. Why? GM most likely will give it to their former competitors," Mrs. Bachmann said. "What is she getting for this? What's her remuneration? She had the rug pulled out from her and her husband. They virtually lost everything overnight. To what? To what Michael Barone calls a gangster government!" Mrs. Bachmann went on to describe the Obama administration as an "imperial presidency," bashing the various czars named to assist him in different areas.

"No business is safe when you see the administration appoint czars, car czars, wage czars," she said. "There are over 20 czars who have been appointed and what do they do? Bypass that Congress."

Mrs. Bachmann's impassioned "gangster government" speech was captured on video and uploaded to the Internet, where it has received nearly 1 million views.

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