Congress coming to aid of car dealers

  • Article by: KEVIN DIAZ , Star Tribune
  • Updated: June 9, 2009 - 11:31 PM

Lawmakers are preparing legislation that would put the brakes on forced dealership closings until the government has had a chance to review General Motors' and Chrysler's reorganization plans.

WASHINGTON - A week after car salesmen from Minnesota and around the country converged on Congress, lawmakers are preparing legislation that would put the brakes on forced dealership closings until the government has had a chance to review General Motors' and Chrysler's reorganization plans.

Two bills being introduced in the U.S. House this week would provide some measure of hope for 53 Minnesota auto dealerships that have received termination letters from the two troubled automakers.

One bill, to be introduced today by Rep. John Kline, R-Minn., would give targeted auto dealers temporary protection from millions of dollars in withdrawal fees owed to a union pension plan.

In a letter to President Obama on Tuesday, Kline said the dealers have been hampered by "the lack of information, data, and reasoning behind the decision to close these dealerships." His bill would give the dealers protection from their pension liabilities until after the Obama administration's Auto Task Force reports to Congress on the government's role in the closures and the closures' effect on dealers' pension obligations.

For some dealers facing the involuntary loss of their franchises, the pension payments could spell personal financial ruin, said Shakopee Chevrolet owner George McGuire, one of a dozen Minnesota dealers who went to Capitol Hill last week.

"In the end, you're facing financial annihilation," said McGuire, who could be on the hook for what he called a "seven-figure" payment to the Teamster-sponsored Central States Pension Fund.

Kline said his bill is not designed to remove dealers' obligations to the underfunded pension fund, but to give policymakers time to assess the appropriate course of action. "What we're trying to do is slow down the process," Kline said. "It doesn't put a final resolution on this issue."

Kline's pension measure follows a broader bill filed Monday that would restore the franchise agreements between auto dealers and GM and Chrysler. Under bankruptcy, the automakers are not required to recognize state franchise laws. Minnesota's laws are considered some of the strictest in the nation. Among Minnesota co-sponsors are Democrat Betty McCollum and Republican Erik Paulsen.

"Picking winners and losers by arbitrarily closing local dealerships without rhyme or reason is wrong," Paulsen said. "These small businessmen and women are being given no recourse."

It remains unclear whether Congress has the power to intervene in the automakers' bankruptcy proceedings. On Tuesday, a bankruptcy judge said Chrysler can go ahead with plan to terminate the franchises of 789 dealers.

U.S. Judge Arthur Gonzalez issued the order, saying the franchises can no longer act as Chrysler, Dodge and Jeep dealers, effective immediately.

But the bipartisan legislation is a sure sign lawmakers heard the concerns of their hometown auto dealers.

"After we saw genuine outrage by lawmakers, we started to get a lot of momentum," said Scott Lambert, executive vice president of the Minnesota Auto Dealers Association, which organized the grass-roots lobbying effort.

Kevin Diaz • 202-408-2753

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