The House of Representatives, in a move of defiance against the Obama administration, added a provision to a spending bill that will force GM and Chrysler to restore franchise agreements with their networks of dealers as necessary conditions of partial government ownership. Dealers have been lobbying Congress for its support and claim that the government and the automakers ignored state franchise laws by breaking dealer contracts as part of their restructuring, and stand to put up to 200,000 workers on the unemployment line.
GM is vastly reducing their dealer network by at least one-third as they plan to cut more than 2,000 franchises from their network of 6,000. Chrysler cut 789 dealerships to bring their count down to 2,400.
President Obama has expressed his disapproval of the measure citing a breach of the doctrine that separates the spheres of the three branches of government.
The automakers also oppose the plan. They believe that it will slow their plans for growth and that it would be counterproductive to dealer profitability, as it would weaken the bottom lines of those dealers otherwise still in the network.
Senator Charles Grassley, R-Iowa, has introduced similar legislation for consideration in the Senate.
– By: Stephen Calogera
Photo Credit: Official White House photo by Pete Souza (via Flickr)