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Auto Task Force—Controversy, Criticism and Why Much Remains the Same

Car dealership
Car dealership

Remember when the auto industry was in a free fall in late 2008?

Remember what nearly everyone in and out of the auto industry said about the domestic auto makers having too many poor performing dealerships around the country?

I do.

I remember how many dealers told me off camera, "Of course there are too many of us out here selling Chevy, or Ford, or Chrysler." I also remember how many would also say, "Hey, if we close the bad dealers, business for everyone will be better."

I bring both of these up as a reality check to keep in mind as the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) releases an entitled: “Factors Affecting the Decisions of General Motors and Chrysler to Reduce Their Dealership Networks."

The audit conclusion: it is unclear if the Obama Administration’s push for accelerated dealership closings mandated by the auto bailout of General Motors and Chrysler “was either necessary for the sake of the companies’ economic survival or prudent for the sake of the Nation’s economic recovery”.

In addition, the audit found, “Treasury made a series of decisions that may have substantially contributed to the accelerated shuttering of thousands of small businesses and thereby potentially adding tens of thousands of workers to the already lengthy unemployment rolls – all based on a theory and without sufficient consideration of the decisions’ broader economic impact.”

Let's put this in simple terms: The auditor doesn't think President Obama's Auto Task Force should have forced GM and Chrysler to close so many dealerships and those closings contributed to thousands of jobs being needlessly lost.

Whether or not you agree with this conclusion, make no mistake GM and Chrysler did need to be restructured. If they weren't, one or both would have gone away for good or wound up broken into pieces.

"“Treasury made a series of decisions that may have substantially contributed to the accelerated shuttering of thousands of small businesses and thereby potentially adding tens of thousands of workers to the already lengthy unemployment rolls" -, Audit Report

As for the closing of dealerships, there's no clear cut answer as to whether it helped out the industry.

I agree with the idea that fewer dealers who are financially stronger is better for GM and Chrysler. The problem was, and to an extent still is, getting rid of those dealers who are weak and poor performing.

Those who should think of selling out don't want to give up their dealership. Their political leaders in Washington (who are supported by big contributions from auto dealers) are always quick to help out local dealers. This is why you will see the usual cast of characters in both parties glom onto this audit and portray the Obama Auto Task Force as out of line.

Two years later, there are fewer GM and Chrysler dealers and both are stronger companies. Did many good dealers suffer from the restructuring? Yes. But the funny thing is that when you talk with dealers privately, you hear much the same thing as two years ago: "Yeah, there are some weak guys who we should probably weed out."

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