From Bloomberg News
By Jonathan D. Salant
June 8 (Bloomberg) -- Automobile dealers have been among the biggest contributors to U.S. political campaigns over the past decade, surpassing all but two groups in donations. That $13 million investment may be paying off as the dealers get a lot of attention on Capitol Hill.
Congress has held hearings on the planned shutdown of thousands of dealerships and is debating ways to provide relief to the businesses. Almost a quarter of the members of the House of Representatives signed letters to President Barack Obama and his auto task force questioning plans to close the dealerships.
The lawmakers’ involvement may disrupt plans by General Motors Corp. and Chrysler LLC to emerge from bankruptcy with a leaner dealer network.
“The intention of bankruptcy is for companies to streamline their operations,” said Maryann Keller, an auto analyst and president of Maryann Keller & Associates, based in Stamford, Connecticut. “If Congress does something that says, ‘No, you can’t terminate contracts that you believe are to your detriment,’ of course it threatens them.”
Executives of Detroit-based GM, which is to shrink its dealerships to as few as 3,500 from 6,000, and Auburn Hills, Michigan-based Chrysler, which plans to shut 789, said the reductions are crucial to their viability.
Fritz Henderson, chief executive officer of GM, told the Senate Commerce Committee on June 3 that the cuts were about “creating a healthy, stronger and profitable dealer network.”
Too Many Dealers
Chrysler President and Vice Chairman Jim Press told the panel his network “is not viable and not profitable.”
Obama has pledged to allow the automakers to make their own decisions on restructuring.
As a result, the National Automobile Dealers Association -- whose members are in all 435 U.S. congressional districts --is asking its more than 17,000 dealers to help it delay, if not scale back, the closings.
Almost 200 dealers visited their lawmakers in Washington last month, and the association has asked its members to recruit their workers to contact local representatives. The McLean, Virginia-based group estimates that on average each dealership has 52 sales people and support staff, and the dealers are often the largest employers in many small towns.
Behind Realtors, Electricians
The association’s political action committee has donated more money to federal candidates in the last 10 years than all but two PACs, according to the Center for Responsive Politics, a Washington research group. It gave more than $13 million from 1999 through 2008, behind only the National Association of Realtors and International Brotherhood of Electrical Workers.
“When an organized industry with a history of generous giving to members of Congress appeals for help, those members aren’t likely to turn them down cold,” said Rogan Kersh, associate dean at New York University’s Robert F. Wagner Graduate School of Public Service.
Lawmakers responded by sending letters to Obama and his task force urging a review of the planned closures. Signing the letters were 104 House members -- 83 of whom received PAC donations from the dealers’ association for their 2008 or 2010 races. These included Republicans Chris Lee, who drafted one letter with Democrat Dan Maffei, both of New York, and Steven LaTourette, who wrote the other letter with Democrat Dennis Kucinich, both of Ohio.
Maffei and Kucinich got no money from the trade group, according to the center’s data.
Fabric of Community
LaTourette, who received the maximum $10,000 donation for his 2008 re-election, said donations had nothing to do with lawmakers’ support for the dealers.
“Auto dealers happen to be part of the fabric of every small community I represent,” he said.
Lawmakers say GM and Chrysler should at least give dealers more time to wind down their businesses, especially when the automakers have gotten billions of dollars in federal aid.
“I don’t believe that companies should be allowed to take taxpayer funds for a bailout and then leave local dealers and their customers to fend for themselves,” said Senate Commerce Committee Chairman Jay Rockefeller, a West Virginia Democrat.
Dealers say they aren’t a financial drain on automakers.
“We purchase the parts, we purchase the vehicles,” said Roger Burdick, who with his brothers owns 20 dealerships near Syracuse, New York. “We carry all the costs ourselves.”
Recruiting Customers, Too
Jack Fitzgerald, who owns dealerships in Florida, Maryland and Pennsylvania and is scheduled to lose Chrysler and Jeep franchises, asked his customers to join the fight. Visitors to his Web site are met with a plea for help.
“If you’re going to rise again in Detroit, you have got to serve the people who are riding around in your cars,” Fitzgerald said.
Senator Bob Corker, a Tennessee Republican, has introduced legislation to require GM and Chrysler to use federal aid to buy unsold cars and parts from shuttered dealers and give them 180 days to close.
Maffei and fellow Democrat Frank Kratovil of Maryland today introduced a measure that would prevent Chrysler and GM from closing the dealers.
“Forced, arbitrary closure of dealers by manufactures will not necessarily be financially beneficial to automakers, and it certainly will not help the local economies where dealers are integral to the business community,” Maffei said.
‘High Profile’ Issue
Hearings and letters may be enough to slow the process, said Representative Ron Klein, a Florida Democrat.
“Sometimes, Congress’s power is not passing legislation,” said Klein, who signed one of the letters and got money from the dealers’ group. “It is creating a very high profile of an issue.”
GM and Chrysler have said that they need fewer dealers so that the remaining retail locations will get more business and be able to invest in their operations. U.S. stores for Toyota Motor Corp. and Honda Motor Co. each averaged more than 1,100 sales in 2008, almost three times as many as at GM’s and Chrysler’s, according to consulting firm Grant Thornton.
Average new-auto revenue was $14.3 million for GM dealers and $12.8 million for Chrysler last year, compared with $40.9 million for Toyota, based on data from auto-research company Edmunds.com. Dealers also make money on used vehicles, parts and service.
To contact the reporter on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net.
Last Updated: June 8, 2009 14:48 EDT
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