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Government Gets in the Way at GM and Chrysler

By Meinan Goto

There’s new evidence that General Motors and Chrysler, both owned partly by taxpayers, are still facing interference in the way they are run. The latest example comes not from the Obama Administration, but from Congress.

At issue are the closures of over 2,000 dealerships announced by the two firms last summer. Despite much grumbling, the decisions appeared to be a non-political one, potentially saving as much as $2.5 billion annually according to The Washington Post. But politics did come in, in the form of congressional pressure to keep the dealerships open. Now GM and Chrysler seem to be bowing – at least in part –to that pressure.

The New York Times reported on Friday that GM and Chrysler have announced plans to “re-examine decisions to close about 2,000 dealerships and that some would probably stay open. Or reopen.” The announcements seem to be aimed at preventing movement on a housebill that would effectively force all dealerships to remain open. Although the bill is still only in committee it has attracted 284 co-sponsors, more than enough to get the attention of the government-sponsored firms.

This isn’t the first time Congress has put political pressure on the firms. As The Wall Street Journal reported in October, there has been frequent pressure from members of Congress, pushing them to reverse decisions from plants closings, to contracting, to shuttering dealerships. So far according to The Wall Street Journal, GM has acknowledged that they reversed the closure decision on 70 dealerships, although they insist with a straight face that each of the decisions were based on their merits. Apparently Congress is still not satisfied.

In a release responding to the GM and Chrysler announcements, Rep. Chris Van Hollen of Maryland stated that the efforts have “fallen short” and promises to “re-double” his efforts to enact legislation that will give auto dealers a “fair and reasonable opportunity to get back in business”. Both bailed out automakers face the difficult task of returning to viability. Such political interference will not make this task any easier.


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