GM closes 500 dealerships tagged during bankruptcy

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Old GM logo that reads “General Motors Truck Company.”

GM has Congress members scratching their heads over the recent closure of 500 dealerships. (Photo Credit: CC BY/John Lloyd/Flickr)

Despite the objections of Congress, General Motors gone through with its plan to close 500 dealerships, reports Automotive News. These dealerships had been marked for possible termination once the GM bankruptcy hearings began. Republican and Democratic House members such as John Boehner and Sherrod Brown of Ohio had asked for a stay of termination until federal hearings surrounding the bankruptcy could be completed, but General Motors acted against the House committee’s judgment.

No logic to GM closing dealerships, says House

In total, 22 members of the House of Representatives questioned the timing of GM closing 500 dealerships (and 1,233 total franchises). The predominant reason lawmakers gave for why GM should wait on the closings is that it would be difficult for the dealerships in question to reopen if they were found to be victims of illegal misconduct on the part of the automakers or the Obama administration. Court rulings on dealer appeals of arbitration decisions were also ongoing, and that process would also be deterred by the closures, reports Automotive News.

GM says the 500 dealerships were a distraction

Suspending the dealership closures “would only divert our collective attention at a critical time and would ignore the independent decisions” between GM and dealers, said GM spokeswoman Ryndee Carney in a press release. Sales and service agreements expired Oct. 31. Dealerships that survived the closures are currently operating under new five-year agreements with GM. Some GM and Chrysler stores are challenging arbitration rulings made with parent automakers in federal court.

TARP inspector general is watching the closures

The special inspector general for the U.S. Troubled Asset Relief Program (TARP), former federal prosecutor Neil Barofsky, is currently investigating more than 2,000 GM and Chrysler dealership closures. In July 2010, Barofsky found in an audit that the means through which many of the dealership terminations were handled was inappropriate. That includes the way the automakers proceeded and the way the Obama administration reacted.

Sources

Automotive News

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