Auto Dealers at Risk Turn to Washington

Auto dealers accustomed to negotiating sales on their car lots clustered in the Capitol instead this week, looking to their trusty, neighborhood lawmakers to do some hard bargaining for them.

With about 2,000 Chrysler and General Motors dealers losing their franchises as the companies retrench, the dealers are pressing Congress to reverse what they see as an unfair process forcing some profitable businesses to close or stop selling new autos, with no explanation from the manufacturers of why they were singled out.

Empty GM Dealership
Photo: Jane Wells
Empty GM Dealership

“We have never gotten one,” said Rick Shaub, the owner of Montrose Dodge in Germantown, Md. He was with fellow dealers outside the office of the House majority leader, Steny H. Hoyer, on Wednesday, the day after his family’s three-generation relationship with Chrysler came to an end.

As they lobby Congress, angry dealers are finding an increasingly receptive audience in the House and Senate, where lawmakers say the mass termination of franchises by the bankrupt car companies is threatening tens of thousands of jobs, not to mention the civic fabric of communities where car dealerships are often a chief local institution.

“The dealers in these small towns are kind of the heart of the town,” said Senator Tom Udall, Democrat of New Mexico, who estimated that 12 G.M. dealers and six Chrysler dealers were affected in his state. “They sponsor the Little League; the big guy in town is usually the car dealer. I am worried about it.”

But the campaign on behalf of the dealers is also providing a test of one of the central criticisms of the government’s intrusion into the operations of many companies, from banks to insurers to auto giants. Even as they talk tough about the mismanagement of car companies, can members of Congress withstand political pressure and allow Chrysler and G.M. to make tough economic decisions that might hurt their own constituents?

For instance, Representative Barney Frank, the Massachusetts Democrat who heads the House Financial Services Committee, came under fire for intervening with G.M. to keep a parts distribution center open in his district, preserving about 90 jobs for another year. Critics said Mr. Frank used his sway as an overseer of federal bailout money to intervene in the company’s decision-making.

Mr. Frank said that he made a common-sense argument to keep the center open, and that he was only standing up for his constituents. “I will bear up under the criticism that I have been doing too much for my district,” he said.

Other lawmakers said the growing number of calls for intervention showed the dangers of large-scale government involvement in the auto companies, saying the result would be lawmakers trying to serve as top executives of auto companies.

“It is incestuous for members of Congress to be saying, ‘Close this plant; use this model; don’t buy the Volt battery in South Korea but make it in my district,’ ” said Senator Lamar Alexander, Republican of Tennessee, referring to the G.M. hybrid car now in development.

Senator Alexander has instituted a “car czar of the day” award in recognition of Congressional meddling. “What do people in Washington know about building cars?” he said. “I don’t think very much.”

Even lawmakers backing the dealers expressed mixed emotions about dipping into the workings of the auto companies. But the dealer closings are striking a nerve in Congress. The federal government has been coming to the aid of the auto manufacturers, which lawmakers see as then turning around and abandoning the element of the industry closest to home for most of them.

Representative Frank M. Kratovil, a Maryland Democrat who has introduced a measure that would restore the franchise agreements, portrayed the situation as a “bailout for the big guys, but a force-out for the little guys.”

In the Senate, lawmakers have not gone as far as the House in pushing a bill to block the move by the manufacturers. But members of the Senate commerce committee this week urged Chrysler to allow dealers a chance to appeal the closures and for both carmakers to give preference to existing, profitable operations when the automakers try to set up new franchises in areas where dealers were shut off. G.M. already has an appeals process for dealers scheduled for closure.

“We think — in the interest of fairness — that profitable dealers in this situation should have a right of first refusal for the new dealership when Chrysler returns to that particular market,” read a letter signed by Senator John D. Rockefeller IV, the West Virginia Democrat who heads the committee, along with other members. A similar letter was sent to G.M.

The car companies say that they need to scale back to be able to return to profitability and that cutting the number of dealers is crucial to that effort.

"Not sure it will do any good"

At a hearing last week of the commerce committee, Fritz Henderson, the chief executive of G.M., said that much of the growth in his company’s dealer network occurred decades ago. Since then, he said, “our market share has shrunk, leaving us with too many dealerships.”

“Everyone agrees — even the dealers themselves — that a restructuring of G.M.’s dealer network must take place,” Mr. Henderson said.

Some point to the millions of dollars in campaign contributions that politically active car dealers have given to Congressional candidates over the years in explaining the intense interest in going to bat for the dealers. But lawmakers say that they are only trying to protect local jobs at companies that have persevered in difficult times and that donations have nothing to do with it.

Representative Dan Maffei, a freshman Democrat from New York who helped write the measure to protect the dealers, said that in his case, local car dealers strongly supported the opposition. “The vast majority are either nonpolitical or support the other party pretty strongly,” Mr. Maffei said.

Mr. Maffei said he hoped his legislation, which has already attracted about 70 co-sponsors, would spur new negotiations between the car companies and the dealers.

The Obama administration has so far shown no inclination to push back against the closures, noting that its efforts on behalf of the manufacturers have kept most dealers in business. And with Chrysler already cutting its ties with dealers, undoing those decisions might be difficult. But lawmakers say they intend to try.

“We are sure that if we do nothing, nothing will happen,” said Representative Hoyer, the House majority leader and a Maryland Democrat, who is backing the effort to restore the franchise contracts.

But it may be too late to help Mr. Shaub. Workers on Thursday were answering the phone at his business as Montrose Automotive rather than Montrose Dodge. “I am not sure this is going to do any good,” he said of the Congressional effort.‘