TOPICS > Economy

Slighted Car Dealers Take Fight to Colorado Legislature

March 8, 2010 at 12:00 AM EST
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Car dealers are struggling to stay open, even though manufacturers GM and Chrysler have rescinded plans to close hundreds of dealerships across the U.S. Tom Bearden reports on how dealers in Colorado are fighting for survival at the state level.
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JUDY WOODRUFF: Last May, GM and Chrysler both announced plans to close hundreds of auto dealerships. But the shutdowns have not all gone according to plan.

On Friday, GM announced its intention to reinstate 661 of the targeted dealers, and others continue to fight back at the state level.

“NewsHour” correspondent Tom Bearden reports.

TOM BEARDEN: Most cities have strips like South Broadway in Littleton, Colorado, long rows of new and used car dealers side by side competing for business.

But, these days, more than a few of the showrooms are empty. That’s partly because, when General Motors and Chrysler went bankrupt last year, the law gave them the opportunity to break contracts with their dealers. Both companies embarked on dramatic reductions of their dealer networks.

While GM announced last week it would restore more than half of the dealerships it had started to wind down, the company says it still needs to reduce the number of dealers nationwide. Both automakers said greater efficiency will allow them to return to profitability and pay back the loans they got from U.S. taxpayers.

JIM FYNES, former Chrysler dealer: What percentage of parts are we selling to a customer coming in?

TOM BEARDEN: Jim Fynes used to be a Jeep Chrysler dealer, until the automaker sent him a letter last May telling him he had 29 days to shut down. That decision cost him a great deal of money.

How much have you lost?

JIM FYNES: Geez. You know, it’s really sad to see what happens. Right now, it’s over $4 million I have lost because of what Chrysler did to me.

TOM BEARDEN: Chrysler also shut down a Dodge dealer just across the street. Fynes stayed open, selling used cars. The Dodge dealer shut down entirely.

JIM FYNES: This is a store we had a little over 80 employees. Today, I have 30.

TOM BEARDEN: And then, last month, Fynes said Chrysler added insult to injury. He says they gave his Chrysler and Jeep franchises to the former Dodge dealer and allowed him to reopen.

JIM FYNES: You know, here I am, a rejected dealer. And the other right across the street down here is another rejected dealer also. But, on February 12, they put that dealer back into business. So, they have taken my franchises and given it to the store across the street.

WOMAN: Our next bill up is House Bill 1049.

TOM BEARDEN: A bipartisan effort in the Colorado State legislature aims to protect rejected dealers in the future. The House has already passed a bill that gives any dealer who has lost a franchise the right of first refusal should an automaker decide to open a dealership in the same area within the next 10 years.

Republican State Senator Shawn Mitchell is carrying the legislation in the Senate.

SHAWN MITCHELL, R, Colorado state senator: This isn’t about cost-cutting. They’re not closing these dealerships down. They’re cutting out some dealers and giving the opportunity to other dealers.

TOM BEARDEN: Sweetheart deals?

SHAWN MITCHELL: Sweetheart deals, friend connections, brother-in-laws, political agendas, I don’t know. I’m not sure whose agenda is being served. But I know it’s not fair play when you get permission to close a dealership and then, instead of closing it, you just give it to somebody else.

NARRATOR: At the new GM, nothing is more important than paying back our taxpayer loans. Unfortunately, legislation is moving through the Colorado legislature that will cost taxpayers more money.

TOM BEARDEN: General Motors launched a $60,000 advertising campaign on local radio stations and in print opposing the bill, saying it would prevent them from closing inefficient dealers.

Dale Sullivan, GM’s regional business operations manager for 14 Western states, testified, the legislation could threaten the company’s very existence.

DALE SULLIVAN, Western regional manager, General Motors: House Bill 1049 will result in significant new costs for us, hinder our ability to repay our taxpayer loans, and establish a dangerous precedent.

If this precedent were to be duplicated across the nation — and this is the key — this could set a precedent that could go throughout the nation — it could threaten the future of our company of GM, the livelihoods of tens of thousands of people we employ in the U.S., like myself, and the business of our suppliers and thousands of well-run dealerships in the GM family.

TOM BEARDEN: The automakers have already negotiated a reduction in the time period from 10 to seven years, and hope to reduce it even further before final passage.

SHAWN MITCHELL: And the decision whether to close or not close a dealership…

TOM BEARDEN: But state Senator Mitchell says, if the economy gets better, and the automakers decide to reenter a market, the former dealers deserve a chance to get back into the business.

SHAWN MITCHELL: If the market rebounds, if everything that Mr. Sullivan is saying here today turns out to be wrong, and we’re going to expand, rather than contract, there’s nothing wrong with that dealer being first in line to get his dealership back. In fact, I think there’s everything right about that dealer being first in line to get his dealership back.

JIM FYNES: They’re just trying to wear us out, until we just go away.

TOM BEARDEN: Jim Fynes pointed out that his franchise was given to somebody else before his case had gone through a congressionally mandated arbitration process, which was supposed to review such decisions by the manufacturers.

JIM FYNES: When somebody can, arbitrarily, literally just take your franchise away from you, to the point where you have been profitable every year and try to make it in this economy, this legislation is very important of which to give us a chance to have a date back in court.

And, right now, I can only say that Chrysler is doing all they can to block every opportunity, for whatever reason. I have no idea what they’re hiding from, but nobody should be able to go ahead and get away with this.

TOM BEARDEN: Even if the Colorado bill passes, it won’t help Fynes, because it can’t be retroactive.

It won’t help David Fitzgerald either, but he wants it passed to protect still-functioning dealers like his brother. The former owner of Northglenn Dodge testified that his dealership was among the top three brand performers in the Denver market, that his franchise was transferred to a Jeep Chrysler store just a few blocks away, for no apparent reason.

DAVID FITZGERALD, former Dodge dealer: I don’t want the money. I want my dealership back.

TOM BEARDEN: Fitzgerald was forced to lay off more than 100 people when he switched to used cars. Chrysler declined our request for an on-camera interview, and instead supplied this written statement, which said, in part: “A Chrysler group representative previously testified on the Colorado bill before a Colorado House committee. The stark reality is that the old Chrysler had to choose between downsizing its dealer network to match the market, or face complete liquidation, which would have resulted in the elimination of all dealers nationwide.”

The committee unanimously voted to send the bill to the full Senate. Senator Mitchell predicts an overwhelming passage.

GWEN IFILL: On another auto industry story, Toyota today took the unusual step of holding a news conference with engineers to rebut concerns about whether vehicles’ electronics systems could have caused acceleration problems.

The move comes as House lawmakers said they wanted to know more about a 2006 memo in which employees described safety shortcuts. That memo was first reported today in The Los Angeles Times.

For the record, Toyota is an underwriter of the “NewsHour.”