Dealership closure decisions prompt Congressional investigation

The extraordinarily complex undertaking that is the restructuring of the U.S. automobile industry was in full view today when a subcommittee of the House Judiciary Committee opened hearings on dealership shutdowns negotiated by General Motors, Chrysler and the Obama administration. At issue is both the thinking behind the decisions to close more than 3,000 dealerships and a pending bill that could reverse all or many of those decisions, according to Cable News Network (CNN). The head of the administration's Task Force for the Auto Industry, Ron Bloom, a former investment banker, testified today that the closures were critical to the restructuring effort, CNN said. But some members of the subcommittee have objected to some of the individual shutdowns and raised the specter of unfairness or worse. "They had a criteria, but I don't know what their criteria was, what the data was," said Rep. Steve Cohen (D-Tennessee), according to CNN. "Some were profitable, and there's even concern that there might even be others open in areas where they closed them." Given the unfortunate tendency of Washington politicians to speak in semitruths, it is difficult to tell whether the Congressional concerns are legitimate or just part of seemingly relentless Republican Party efforts to discredit the administration. Indeed, Rep. Lamar Smith (R-Texas), said his concerns included some of the closures but went beyond them to the future of the U.S. economic system. "Every day, I guess I get a little more concerned about what the administration is doing in regard to the GM and Chrysler bankruptcies," he said. "It seems to me that literally the administration is declaring war on capitalism." Rep. Dan Maffei (D-New York), who authored the bill, said he was concerned about the owners of the dealerships that were ordered to close. "It's really an issue of fairness and whether these dealers, given that they've got these big taxpayer-paid-for bailouts for GM and Chrysler, whether the dealers who employ 50 people each on average and are big parts of local communities, shouldn't have some sort of say over how these dealer networks are going to be reorganized," Mattei said, according to CNN. "We felt it was not fair for these dealers, given that the bankruptcy was negotiated in part by the federal government and with federal money, that the dealers would have to not be able to have their rights." Not all dealerships forced to close were left with nothing, CNN said. GM offered its franchises up to $1 million in closing payments and gave them over a year to sell their inventories. GM also reversed dozens of closing decisions after dealers appealed to the company. But Chrysler didn't offer any payments, forced dealerships to shut down within three weeks and had no appeal process.

General Motors gets rear-ended by its executives

Top executives at General Motors finished running the once-proud automaker into the ground Tuesday as they dumped their remaining shares of stock and watched the company's stock price fall to its lowest since the Great Depression in the 1930s. The stock sank as low as $1.09 on the New York Stock Exchange before closing at $1.13, a 22 percent decline, according to the Reuters international news service. Former GM vice chairman and product chief Bob Lutz and five other execs revealed Monday in Detroit that they were selling their last holdings in the largest U.S. automaker, including $315,000 in stock, Reuters said, as GM approached a government-imposed deadline for reorganizing or filing for bankruptcy protection. It was a humiliating collapse for the carmaker, one of the original members of the NYSE, which for decades symbolized the strength and success of U.S. capitalism. But GM came to stand for corporate atrophy, as the automaker doggedly refused to build energy-efficient small cars to compete with its overseas rivals despite a plunging market share. Instead, GM used its wealth to lobby for tax changes and environmental law waivers that kept profits high in the short term but actually sealed its doom. Few Americans will forget seeing the chief executives of the three largest U.S. carmakers waste tens of thousands of dollars flying to Washington, D.C., in private jets to beg Congress for taxpayer bailouts. Now, that's out of touch! Of the three -- Rick Wagoner of GM, Bob Nardelli of Chrysler and Alan Mulally of Ford -- only Mulally remains in his post. Not coincidentally, Ford is the only one of what used to be known as the Big Three to have refused government loans so far.

The last American car

Chrysler's bankruptcy filing may have bought the beleaguered carmaker a little more time in the short term, but signals the end of the U.S. automobile industry as any of us have ever known it. When the third-largest domestic car company emerges from court protection in August, the entire industry will not look anything like it does now. If the U.S. government gets its way, and there doesn't seem to be much reason to think it won't, Chrysler will be majority-owned by the United Auto Workers healthcare trust fund and merged with Fiat, which will be tasked with introducing the innovative, gas-efficient new models that stumped its previous owners for 40 years. If it is successful running Chrysler, Fiat -- an Italian company -- will end up the majority owner, according to the Reuters international news service. General Motors, once the symbol of American capitalism, is laying off tens of thousands of workers, shutting down subsidiaries and will wind up majority-owned by the U.S. government. Bondholders and previous shareholders will end up with very little. Only Ford, the second-largest U.S. automaker, has not mortgaged its present and future to borrow billions from the feds. U.S. President Barak Obama endorsed the Chrysler bankruptcy filing, saying it would save jobs at the automaker, and at auto parts companies and other firms that supply it. But Obama criticized some of Chrysler's bondholders and creditors that refused to agree to a proposal to reduce the automaker's debt by nearly $5 billion. "I stand with Chrysler's employees and their families and communities," he said. "I don't stand with those who held out when everybody else is making sacrifices. That's why I'm supporting Chrysler's plans to use our bankruptcy laws to clear away its remaining obligations." The bankruptcy filing evoked memories of 1980, when the United States provided more than $1 billion in loan guarantees to keep Chrysler afloat.