Walden, others blast automakers for decision and handling of it
From AP and KTVZ.COM news sources
WASHINGTON (AP) - General Motors and Chrysler executives appeared before a House hearing Friday to defend the closings of hundreds of dealerships - and so did Bend's Bob Thomas, who blasted the loss of a nearly century-old franchise as "so unnecessary, so wrong, so wrongly executed."
Thomas and other auto dealers say the plans will do little to cut costs, and that they were given vastly inadequate time to determine their course of action.
"The marketplace should be the sole arbiter of which should fall by the wayside, not the arbitrary acts of well-meaning administrators," Thomas told the House oversight subcommittee.
C-SPAN's coverage of Thomas's testimony can be viewed here and Rep. Greg Walden's testimony can be viewed here, both via YouTube.
Rep. Greg Walden, R-Ore., ranking GOP member of the panel, chastised the automakers for dealing communities a tough blow without considering the impact. He displayed a long Google Earth fly-over - at F-15 jet fighter speed - of the 116 miles between Burns losing its GM dealer, and Payette, Idaho, the closest one.
Walden said that in Bend, GM "terminated the only GM dealership with substantial service repair facilities servicing tens of thousands people in a 16,000 square mile radius."
The panel reviewed the closing of 789 Chrysler dealerships and plans by GM to shutter about 1,350 by the end of next year as part of their bankruptcies.
Walden told the hearing, "Since American taxpayers now own 60 percent of General Motors, we have a right to know just how the decisions affecting our constituents are made. We also have a duty to make this process more accountable and transparent for all concerned." (Full text of both men's statements are below.)
Michigan Democratic Rep. Bart Stupak, the subcommittee chairman, said he was concerned the dealership closings may damage the brands instead of helping them.
GM CEO Fritz Henderson said in prepared remarks the dealer cuts were "quite painful" but necessary to preserve over 200,000 jobs at GM's remaining dealers. Chrysler Deputy CEO Jim Press said the cuts were needed to save the company.
Press said 80 percent of the cut-off dealers didn't meet quotas. He also said that "profitability alone is not an adequate measure to determine viability to Chrysler's future," since many were profitable due to sales fo used cars or other brands. Half, he said, sell 100 or fewer vehicles a year, and many sell competing brands.
Henderson called the reorganization "our last chance" for GM to survive, by changing a "retail network largely created in the ‘50s and ‘60s." A "right-sized network of strong dealers" also will allow GM to reduce, over time, direct dealer support that costs the company millions, he said - calling it "subsidies" of those dealers.
"Our best-in-class competitors bear few if any of these costs," Henderson said.
Walden asked Henderson about his previous comments that dealers were not being terminated. The GM CEO said the dealers were offered "wind-down agreements" instead.
"Mr. Thomas, do you feel terminated?" Walden asked.
"Very much so," Thomas replied. "We don't have the opportunity to be a full-fledged GM dealer any more. ... I'm partially in the game, but I'm not in the game."
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Statement of Robert S. Thomas testimony before the House Energy and Commerce Committee, Subcommittee on Oversight and Investigation
Friday, June 12, 2009
May 15, 11am the FedEx truck arrives. Employees watch as the driver hands me this cardboard envelopes that contains my destiny.
I received an unsigned letter from General Motors. The tone of the letter was vague and referred to criteria but not specific methodology neither stating the relative importance nor how great a period of time was being referenced.
The letter stated "we don't think we will be able to renew your contract in October, 2010. This is not final; submit what you like by the end of the month to this email address..."
The significance of this letter became clear on June 2, when the content of the vague letter had been construed into the offer of a Wind Down Agreement.
The agreement offered on the 2nd had to be returned in time to arrive in Detroit by the 12th, a scant 10 days to decide one's options, to confer with professionals regarding unprecedented legal matters and loved ones about our financial and professional future.
Testimony:
My grandfather immigrated to the US in 1900 and by 1918 had established himself as a Chevrolet dealer in Bend, Oregon. His daughter married my father and he was a dealer until 1982, when I succeeded him.
Our company has woven itself into a social fabric of the community since the time it was a village. Our family has provided automobile sales and service, civic leadership and community involvement every year continuously---since 1916!
These are hard times for Bend, but not as difficult as those we survived in the Great Depression and to World Wars. General Motors has been with us the whole time-from 1916 forward.
We have BEEN GM to our community. Now, it is a dark time when GM must abandon our town, our region and us. Just as GM is an icon, WE enjoy iconic status in our region---always there, always helpful and compassionate, always acting responsibly.
The letters we garnered in support to our appeal to GM were humbling in their appreciation of our caliber and quality of service and community support. Moreover, there was confusion as to why Bend, now 80, 000 strong will be abandoned as will we, their dealer of choice, the largest GM dealership in Central/Eastern Oregon.
Their world is crumbling. Things they thought they could count on are being taken away...long standing reliability, integrity, a safe harbor. In a very real sense, they are afraid.
Who benefits from this taking, this cancellation that is so unnecessary, so wrong, so wrongly executed?
Not GM. Having no dealers in Bend will not increase GM sales. Not the 216, 000 people in our region who are left solely with a small GM dealer in a tiny town at its perimeter, with limited inventory and repair capacity.
Not our community, who has relied on us always to generously support its activities.
Not our employees, who are highly trained to work on sophisticated GM products like Cadillac and Chevrolet, and service clientele with courtesy and compassion.
Not our customers, who bought our products thinking, like we did, that we would be here forever.
That's our business model, the longest term you can imagine. ALWAYS DO IT RIGHT. Be here for the long haul. Earn the loyalty of your clientele and they will reward you with long term patronage.
Over the years, that's been GM's business model, too. And we were a good fit for 91 years-until we got cut from the team.
Why are these cuts necessary? I recently attended a meeting of letter recipients in Oregon. Who was there? A room full of respectable business people with whom I have attended GM business meetings for 30 years. Obviously, they are able business people to have survived, as have we.
The marketplace should be the sole arbiter of which should fall by the wayside, no the arbitrary acts of well meaning administrators.
If the plan to replace us with another GM dealer, why have we been deprived of the opportunity to make such a transaction, with their approval? Will our market be awarded to a GM favorite or insider? This would seem to be an unreasonable and wrongful taking of a valuable asset, nurtured through the years only to be snatched by an overreaching at a moment of opportunity inside the bankruptcy.
And what of the inventory that remains? In our case, some 4 million dollars, the value of which could shrink by a million or more from what we paid. Over a years supply of GM cars await our sale. A half million dollars of parts cannot be returned.
What I would hope for in such a dire straits would be a request of REASON. Allow us to provide support for those GM customers in our region and relieve us of the inventory obligations we incurred in good faith by repurchasing at what we paid.
This is a small price to pay for potentially depriving a long and faithful associate of its livelihood.
Respectfully submitted,
Robert S. Thomas
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Opening Statement of the Honorable Greg Walden
Ranking Member, Subcommittee on Oversight and Investigations
Hearing on "GM and Chrysler Dealership Closures and Restructuring"
June 12, 2009
Let me thank Chairman Waxman and Chairman Stupak for concurring with me in the need for our committee to conduct an oversight hearing to get answers regarding the termination of auto dealer franchises all across America.
I want to recognize the dealers - including a constituent of Oregon's Second District - which I represent: Bob Thomas of Bob Thomas Chevrolet-Cadillac in Bend, Oregon. Bob and the rest of the dealers have taken the time and expense to travel to Washington and provide us their perspective. I also welcome Mr. Press, of Chrysler, and Mr. Henderson, from GM. We have some hard questions for you, and I appreciate your willingness to come here today and explain your situation with clear and straight answers.
Since American taxpayers now own 60 percent of General Motors, we have a right to know just how the decisions affecting our constituents are made. We also have a duty to make this process more accountable and transparent for all concerned.
So let's start with a look at customer service. Mr. Henderson has spent a large sum of our money to purchase ads in major newspapers proclaiming his concern for greater transparency and customer service.
Yet, Mr. Henderson has dictated the closure of the GM dealership out in Burns, Oregon. Now, if you're a GM customer and the dealership in Burns, Oregon Ruel Teague Motor Company, your nearest GM dealer is in Payette, Idaho, 136 miles away. That's the equivalent of driving from Philadelphia to Washington, D.C. Since we don't have the three plus hours it would take to drive there, we're using the fastest plane in our air force-the F-15 Eagle-and Google Earth to demonstrate the route to that new brand of customer service.
Just about one month ago, General Motors and Chrysler sent what were effectively termination notices to about 2,000 auto dealerships nationwide. We are told these notices serve to accelerate restructuring plans that are a must-do step for these troubled automakers. This is so Chrysler and GM can emerge successfully from bankruptcy with stable financial support - about 60 percent of this support, by the way, courtesy of U.S. taxpayers.
Many dealers and the communities they serve were blindsided. The mid-May notices came in the form of complex, take-it-or-leave-it "wind-down" contracts, with just weeks to make important and expensive decisions about their livelihoods. Few explanations. No real opportunity to negotiate corrections or even sell to another, more favored dealer, and no clear rationale for why they were chosen for closure. Thousands more received continuation contracts, equally complex, which forced them into 18 months of limbo, giving up protections against abusive practices they would normally have under state franchise law. But they had no choice -- it was take it or leave it. Oh, and the agreements required the dealers to say they weren't signing under duress.
Let's talk about transparency.
We have yet to get a clear answer on how the so-called "rationalization" of dealer networks will save the automakers - or taxpayers - money. "Rationalization" seems like the 21st century version of "We had to burn the village to save it." I want to hear this morning from GM about how cutting dealers will really save $2 billion. The National Automobile Dealers Association argues that dealers cost the automakers little on margin, and provide necessary and convenient outlets for consumer sales, and even the local connection the automakers so sorely need.
Dealers, even small dealers, make sales and make the automakers money. By what we can gather to date, many dealers affected are not bad-apple operations, maybe they weren't meeting your mandated sales quotas, but it's hard to see them as cost-drains on automaker operations; they often are mainstays of the local communities they serve, they contribute substantial taxes, support local sports and community events, they have good reputations, they are established, they are hard-working, and they are struggling in a horrible economic environment. And soon, their employees will be out of work. By one estimate, the termination notices may cost upwards of 190,000 well-paying jobs.
The validity of the cost issue is of particular interest since the press reported yesterday that the House Majority Leader said he had spoken to the White House's auto task force and it acknowledged that the automakers will see no immediate cost saving from closing the dealers.
Mr. Henderson, you say GM is going to be more accountable. Let's talk about accountability. Who made the closure decisions? How were they made? When were the decisions made? Who made the recent decisions to reverse closures of 41 dealerships?
Mr. Henderson, you say GM will be more focused on customers. Let's talk about customers. How is it pro-customer to reduce competition by eliminating dealerships, which compete with each other for price and quality service? It's been said that our domestic automakers own rural America. But how does it serve rural America to eliminate that lone dealership in Burns? In this Alice-in-Wonderland world of "rationalization" where up is down, and less is more, how are customers served by less competition and higher prices - while on the taxpayers' dime?
In Bend, Oregon, for example, the General Motors terminated the only GM dealership with substantial service repair facilities servicing tens of thousands people in a 16,000 square mile radius. Do the planners behind this restructuring understand the rural America where I come from? Do they really understand rural customers, the rural market? Let's talk plainly - if you just want to turn GM and Chrysler into a network of urban dealerships, then tell me, but don't ask me and my constituents to bail you out.
Or, is your plan to use the crisis of the bankruptcy as a cheap and quick way to get rid of dealers you don't want, only to eventually sell a new franchise in a market you've left? If your plan is to reduce dealers, can you give me a guarantee that you won't simply get rid of a Bob Thomas only to turn around and offer a GM franchise in Bend to someone else in the coming months?
The goal for me in today's hearing, Mr. Chairman, is to get straight talk and get facts. We need to know the real reasons for these closure decisions and whether they are really justified. We need to know how this is really a good deal for the taxpayer and the consumer. We need to know whether auto dealers targeted for closure and their local communities are getting a fair shake.
We all recognize the very tough and painful times for the auto industry, especially its workers and suppliers; the reverberations of Detroit's troubles have already reached into every one of our districts.
I look forward to the testimony, and I look forward to working with Chairman Stupak on further investigating this matter and hope a future hearing will focus on the role of the President's Auto Task Force.
