February 13, 2009 - Auto Dealers in 13 States, Washington D.C.

Auto dealers push for laws to protect brands

GM faces higher restructuring costs

Auto dealers push for laws to protect brands

Auto dealers in 13 states are pushing for new laws that manufacturers say would raise their costs for killing brands by billions of dollars.

Michigan is not among those 13 states.

The action by dealers highlights the economic pressures tearing at the industry's traditional relationships as General Motors Corp. and Chrysler LLC try to shed costs as part of their survival plans due to the Obama administration Tuesday.

Costs from new laws to protect dealers left without cars to sell could hit General Motors Corp. the hardest, as it's seeking to shed up to four brands as part of its $13.4-billion restructuring. Other automakers also are shedding hundreds of dealerships in the face of the worst market for new cars and trucks in three decades.

The proposals "amount to a retroactive risk-free business investment," the Alliance of Automobile Manufacturers, which includes Detroit automakers and Toyota Motor Co., said in a statement. "None of these measures helps to protect the jobs of thousands of dealer employees who would not receive any share of the dealer payout."

But dealers say the laws are needed to protect the investments -- often under orders from the manufacturers -- they've made. GM has said it is considering closing its Saturn brand, but most of its 396 Saturn dealers sell only that brand in specially designed buildings, a condition GM set when it launched Saturn in 1990.

Virginia's legislature has approved bills that would require that automakers guarantee the value of a dealership under a brand scheduled to close, and pay an affected dealer's rent or mortgage for up to three years. It would allow dealers to combine brands in the same store, moves automakers frequently block.

Donald Hall, president of the Virginia Auto Dealers Association, said the bills only give dealers the chance for payments in a court case, not a guarantee, and that dealers needed more power to fight decisions by automakers.

"We watched them run Oldsmobile into the ground and pay dealers nothing who had been in business 80 or 90 years," he said, referring to the former GM brand. After paying more than $1 billion to select dealers to close Oldsmobile nationwide, Hall said GM "said the thing we do now is let it run into the ground on its own without doing anything for the franchises."

Auto dealers have traditionally been powerful political forces in states, accounting for campaign contributions and a large source of tax income. Thanks in large part to that power, state laws prevent automakers from simply closing dealerships because of economic conditions, and several analysts maintain the Detroit automakers need to shed hundreds of dealers.

Original Story - Detroit Free Press