Chairman Rockefeller's Opening Statement on GM And Chrysler Dealership Hearing

June 3, 2009

Three weeks ago, Chrysler announced that it was terminating 789 franchises nationwide.  I spoke with Pete Lopez, an auto dealer in Spencer, West Virginia, present here today, who had just learned his contract was being terminated.  He was devastated and filled with anxiety.  In a flash – his work, his livelihood, and the economic security of his employees were in serious jeopardy.  Compounding this news, a few days later Pete learned that GM was also going to terminate his other franchise, putting more of his workers at risk of losing their jobs. 

This story is sadly not unique to Pete Lopez, who I want to sincerely thank for coming forward to give his testimony in front of this Committee.  We are grateful for your time and thank you for all that you do.

This is a story echoed throughout West Virginia and throughout the country.  Nearly 2,000 dealerships are closing throughout America and over 100,000 jobs are at risk. 

We have to do better.  We can save some of these jobs and help these communities. 

Let me be very clear – I don’t believe that companies should be allowed to take taxpayer funds for a bailout and then leave local dealers and their customers to fend for themselves with no real notice and no real help.  That is just plain wrong.

We are talking about dealers who have invested everything they have in their dealerships, people who have contributed to their communities, and whose families in many cases have been selling automobiles for decades. 

We are also talking about the consumer.  People who are working as hard as they can to make ends meet in this challenging and difficult economy and doing the very best they can.

Chrysler is eliminating 40 percent of its dealerships in my state, and I have heard that GM will eliminate more than 30 percent.  This means that some consumers in West Virginia will have to travel much farther distances to get their cars serviced under warranty and such a dramatic decrease in dealerships could mean less competition in the new vehicle market.  Basic economic principles tell us that less competition could lead to higher prices for consumers. 

Each company has a responsibility to assure this Committee that it is not using this restructuring process as a way to unfairly increase prices on hardworking Americans who have remained loyal to our domestic auto industry.

I have also read that both companies have claimed it is eliminating “underperforming” franchises, somehow implying that the dealers themselves are responsible for the companies’ problems. 

I’d like some answers to these reports.  Local auto dealers did not lead GM and Chrysler into financial ruin – and any suggestion otherwise seems quite absurd. 

Each company says it took great care to evaluate each dealership on its individual merits and that each dealership knows exactly why his or her franchise was terminated. 

However, I have read the boilerplate termination letters that they sent to dealers in my state, and I have not seen personalized explanations for their franchise termination.  In fact, GM didn’t even sign a person’s name to the letter and simply closed by saying, “Sincerely, General Motors Corporation.” 

We also know that Chrysler gave its dealers less than one month’s notice prior to termination – which is truly unbelievable.

It is impossible for any dealer to wind down his or her business on such short notice.  It appears that Chrysler cared little about the devastating impact that such a short timeframe would have on the dealers and their employees – and the many families affected by these decisions. 

Chrysler’s “plan” to assist dealers with their inventory is equally troubling and extremely insufficient.  It puts all of the burden and costs back onto the dealers themselves, without the company taking responsibility for the losses that dealerships will suffer.

At this point, GM, to its credit, has provided its dealers until October 2010 to continue operations.  Although the specific details are not yet clear, it is also my understanding that the company plans to repurchase the dealers’ new inventory and parts. 

However, with the recent news that that GM will enter bankruptcy, dealers and the Committee are rightly concerned that the company will not honor its commitment. 

Is GM ready to promise the Committee today that it will live up to its word even if it enters bankruptcy?  That question must be answered at this hearing.

I want to emphasize today that the consequences of Chrysler and GM’s actions are very real in West Virginia and so many other states. 

One dealer I know of is being terminated after building a million dollar showroom within the past year; another has more than $1 million in inventory, but was given less than a month to sell it; and several more are being terminated, even though their families have been selling GM and Chrysler cars for generations.

Local dealers are a valued and important face for GM and Chrysler in rural communities.  Consumers in West Virginia have as much loyalty and trust in their local dealers as they do in the companies themselves. 

One 70 year old West Virginia consumer told me that he has been buying GM cars from the same dealership his whole life, but will no longer buy GM cars because of the callous way that the local dealership was terminated.  “How could a company decide to cut one-third of its outlets and not realize that it will hurt their future sales?” he asked.  

GM and Chrysler – we are hearing from these dedicated Americans and we need you to hear them too. 

I am very glad that we have this panel here today.  It is a chance for you to make your case as to why your companies are taking these actions, or tell us what you are going to do differently moving forward. 

I have many questions for you today – but most specifically and for the record, I would like to ask that the panel address the following key issues:

1. The insufficient transition period given to dealerships whose franchises were terminated;
2. The inability of dealerships to sell vehicle and parts inventory at cost in order to make these franchises whole, as well as the difficulty in disposing of specialty tools;
3. Minimizing job losses by assisting dealerships in maintaining their used vehicle businesses and service and repair centers;
4. Making certain that consumers have access to quality service and how their warranties and service contracts are honored; and
5. Actions that Chrysler and GM are taking to assist terminated dealers during this restructuring period.

My concern runs deep when it comes to the economic viability of Main Street, West Virginia – I will never stop fighting to see that hard working families get a fair shake. 

These are the most challenging economic times since the Great Depression.  We all have to come together and do everything we can to make sure dealers, employees, and consumers are treated fairly. 

I do understand the need for Chrysler and GM to reorganize, but to do this at the expense of workers and consumers is just plain wrong. 

This Committee and the American people will not stand for it.

Thank you.