Closing Car Dealerships: Congress Says 'Not So Fast'

Jun.10.09 | About: General Motors (GM)

Yesterday Congressman Dan Maffei (NY-25) and Congressman Frank Kratovil (MD-1) introduced Bill HR 2743, called the "Automobile Dealer Economic Rights Restoration Act of 2009", which aims at "requiring Chrysler and General Motors to continue to honor their commitments to auto dealers." Not sure if this should be read as the first step of the bailout within the bailout, or a preamble of the government stepping and really telling the big two nationalized companies (well, Fiatized in Chrysler's case, but essentially on the taxpayer's dime) how to run their business. Also, technically the first real shot at government governance was Obama singlehandedly firing Rick Wagoner. But you get the picture.

Furthermore, for a business which many claim is exclusively Republican, is it not a little odd that it is in fact Democrats who are introducing this legislation?

The WSJ had this to say:

The bill, introduced by two House Democrats this week, would effectively halt plans by GM and Chrysler to close a combined 3,400 dealerships. Hoyer, a Maryland Democrat, said that neither the White House nor the companies themselves had offered any economic rationale for the closing of the dealerships.

“The dealers are being affected in a way that will adversely affect many, many communities around this country without an economic benefit to the manufacturers,” Hoyer said in his weekly press conference. Hoyer didn’t say whether he believed the legislation would succeed, but he said it was a cause he believed in.

Bailey Wood, a lobbyist for the National Automobile Dealers Association, which is pushing the legislation, said the intent is to ensure dealers are treated fairly and to limit the closings. “Closing dealerships will not make either Chrysler or GM any more viable, and Congress is realizing that,” Wood said.

That is truly an interesting spin on things. While Zero Hedge, as has been discussed extensively here, does not condone a non-blind approach to dealer shutdowns, the fact that there is an overabundance of them is beyond question. The days of 15 million SAARs are now as extinct as securitization. But now that the government owns pretty much most of the vital electoral constituency industries, acts such as this one are sure to accelerate rapidly in all industries that Obama takes under his nationalization wing. How much efficiency and bottom line improvement will be derived out of this, only a deflating dollar really knows.

Speaking of nationalized industries, how many are looking at airlines as the next sector in need of uncle Sam's worthless dollar? If oil continues the Goldman Gunning (better known as "GG" or "The Summer of 2008 Trade"), the majors, now that they unwound all their inflation hedges in Q1, are likely bleeding cash on par with GM's 9 week cash flow projections every single day, with crude and crack spreads continuing their creep higher. Perhaps it is time for Marla to start doing some statistics on ALPA campaign donations.