Car dealers fight rapid closures; 180,000 workers could lose jobs

DETROIT — Car dealers from around the nation will be in Washington Wednesday to urge President Obama's automotive task force to let the economics, not the government, decide which car dealers should shut down, and when.

The task force has been pushing General Motors(gm) to trim its dealer ranks faster than the several years originally planned as part of its overall restructuring. Speeding up that process will only dump 180,000 more workers onto unemployment rolls in a recession, the dealer group argues.

John McEleney, president of the National Automobile Dealers Association, says he understands that fewer dealerships are needed. But since dealers are independent business owners and get little financial support from the automaker, he argues, they aren't adding to GM's financial problems.

"We understand the realities of the marketplace, but we just think this is the worst time to be doing this," says McEleney, who says the delegation will include about 150 dealers. "By forcing the issue, it's going to have some real negative consequences in many communities, where dealers are the biggest private employers and are involved in the local communities supporting charities."

GM, which is operating on $15.4 billion in U.S. loans, now plans to cut 2,600 of its 6,200 U.S. dealers in 18 months. In its original plan released in February, GM said it would cut 400 dealers a year until 2012. The administration said that was not fast enough.

The task force also has pressed Chrysler to quickly trim its storefronts from 3,200 outlets, and that process now is being worked out in bankruptcy court. In filings with the court, Chrysler said about 50% of its dealers make up 90% of its sales.

John Bowis, president of Chevy Chase Cars in Bethesda, Md., recently sent a letter to customers saying he would no longer sell Chevrolet vehicles, and instead will sell Nissans along with his current Acuras. The move was his decision, and gave him time to find a new automaker to work with.

"I feel very fortunate that I got out when I did, because I'm very worried about my friends who are GM dealers," Bowis says. "It's going to be a tough road for them."

Many dealers are looking at their options, trying to sign new franchise agreements, selling their stores or finding a way to wind down operations slowly, Bowis says. Forcing them to close too fast could create more problems than the auto task force anticipates, he says.

"They may be saving General Motors and they may be saving some UAW jobs, but they are going to create a snowball effect with local bankruptcies all over the country. It was happening through attrition anyway. I'm a perfect example of that."