GM bankruptcy filing will have far-reaching effects, VADA leader says Monday

General Motors’ bankruptcy declaration will ripple across the country in a wave of thousands of unsold vehicles, rows of unused parts and unneeded tools, and thousands of dealerships stuck footing the bill, the leader of a state auto dealers association said Monday.

Dealers were left a month ago feeling abandoned when another of Detroit’s Big Three filed for bankruptcy and announced plans to close almost 1,000 dealerships. GM, as expected, followed suit Monday.

“We are obviously concerned that GM will do the same thing,” said Don Hall, president of the Virginia Automobile Dealers Association.

More than 1,000 GM dealers, including Pat Berrang, owner of Berrang Pontiac-Cadillac-GMC in Waynesboro, received letters two weeks ago informing them that the once mighty carmaker would not renew their franchise contracts. Berrang Chrysler-Jeep-Dodge and Obaugh Ford-Chrysler in Staunton were on Chrysler’s list of dealers targeted for closing.

Berrang has said he would fight any attempt to take his GM franchise away.

Hall sees little use in the effort.

“The truth is these are prepackaged bankruptcies,” said Hall, who expected GM bankruptcy proceedings to be complete within two months. Chrysler completed bankruptcy proceedings Monday.

While not naming GM dealers slated to close, Hall said several from the Shenandoah Valley region have received letters similar to Berrang’s.

The moves will have little effect on future car buyers, since the federal government will be backing their warranties, Hall said.

“Taxpayers now own 70 percent of GM,” Hall said. “I would say it’s a pretty strong corporation these days.”

GM CEO Fritz Henderson has said the company has too many dealerships. Hall’s response: That “is the most schizophrenic statement I’ve ever heard.”

Ron Bloom, the leader of President Barack Obama’s auto task force, stressed that the government was not involved in determining which dealers would close, adding that the closings were “based on economic criteria only, and there’s been no other basis for making that decision.” He also said he did not anticipate any special assistance for targeted dealers, something some lawmakers have urged.

“At no time did anybody from the administration involve itself in closing plants or dealers,” Bloom said.

He said GM didn’t decide to close dealers to reduce sales, but increase them over time.

“Our job was not to get into that level of detail because then we’d be running General Motors,” Bloom said, “and we’re not running General Motors.”

In the restructuring plan company officials put forth — and Obama signed off on — Bloom said company officials decided that the dealer network needed to be smaller to be successful.

“We had to insist that General Motors get itself to profitability,” Bloom said.

Said Hall: “In the end, it’s a huge turf fight, and unfortunately, dealers have no protection in this fight because of bankruptcy.”

Before the bankruptcy filing, Hall said GM was required by Virginia law to buy back unsold vehicles, unused parts and specialty tools.

“In bankruptcy court, GM can petition, like Chrysler, to have those laws ignored,” Hall said.

Hall said closing the dealerships will not save GM “any significant amount of money.” He called the dealer closings an “underhanded” move by GM. He said there has been no rhyme or reason to the proposed GM dealer closures, with some occurring in large markets such as Northern Virginia, Richmond and Hampton Roads, and others in medium-sized towns “where there’s no other GM dealers in the community.”

The VADA president also denied that there was any conspiracy with the closures being related to dealers’ political ties and campaign contributions to Republicans, as some right-wing blogs have suggested.

“I think that is the biggest crock of you-know-what that I’ve ever heard,” Hall said. “Ninety-five to 98 percent of all car dealers are Republicans.”

Most dealers, he said, either give directly to the VADA political action committee, or at most, make small campaign contributions.

Bloom said the government, which is sharing with Canada a 72.5 percent stake in GM, did not want to own the company. He said, however, that the government was the only entity that had enough capital to make the company healthy, stressing that the government took GM shares “reluctantly.”

“The company’s gone through a very challenging time of coming up with a new business plan,” Bloom said.

The White House said it would now make available to GM about $30 billion in additional federal assistance to support the company’s restructuring plan. It also said that GM would honor customer warranties and dealer incentives for those dealers remaining in the company’s distribution network.

For the dealers slated to be eliminated, the White House expects that they will be offered an agreement to “orderly wind down their operations over the next 18 months.”

John McEleney, chairman of the National Automobile Dealers Association, was pleased with that, but in a statement, said the GM bankruptcy, was a “historically sad day for American business.”

McEleney said the key is now to get out of bankruptcy as soon as possible to minimize disruption to the auto industry.

With massive dealer cuts, McEleney said, GM is “cutting its own customer base.”

Thomas Donohue, president and CEO of the U.S. Chamber of Commerce, said in a statement that his biggest concern was the potential “for governments and unions to influence production, product, workforce and management decisions in ways that could jeopardize the automakers’ chances for survival, put politics and special interests above sound business strategy and disrupt [U.S.] trading relationships across the world.

“If members of Congress, along with government officials from the United States to Germany to Canada, are allowed undue influence over management’s decisions,” Donohue said, “then you can write this down: These companies will not return to profitability and their survival will be seriously challenged.”