June 4, 2009 / 11:55 PM / 9 years ago

Senate proposal would force GM, Chrysler on dealers

WASHINGTON (Reuters) - Chrysler and General Motors Corp would have to fully reimburse terminated dealerships and give them 180 days to wind down their operations under a proposal introduced on Thursday in the U.S. Senate.

“We filed this amendment to apply pressure on the automakers to keep their word to rejected dealerships and fully reimburse them for their inventories of vehicles and parts,” said Tennessee Republican Bob Corker.

”We hope Chrysler and GM will take these appropriate actions and make this amendment unnecessary Corker said in a statement after introducing the measure.

Corker’s amendment would not permit judges in both automaker bankruptcies to approve government-funded debtor financing unless his terms are met.

The plan represents the first direct effort by Congress to legislatively influence the GM and Chrysler bankruptcies, which were orchestrated by the Obama administration.

Sponsors hope to attach the proposal to a tobacco regulation bill that is now under consideration but has uncertain prospects for passage.

Dealers and dozens of members of Congress from both houses have pressed the companies and the Obama administration to slow the process down and provide a “softer landing” for businesses losing their franchise agreements with GM and Chrysler.

Chrysler plans to close 789 dealerships, giving them until June 9 to cease operations.

The judge overseeing Chrysler’s bankruptcy plans to rule on Chrysler’s deal plan next week.

Chrysler President Jim Press told Senate lawmakers on Wednesday that dealers targeted for closure as a group had underperformed. He said the company had sold or redistributed virtually all of their inventory.

Dealers say they still face financial hardship and have urged Chrysler to do more for them. Some also complained Chrysler urged them to buy more than they had planned this year to help them save the company.

GM plans to cut nearly 1,600 dealerships over the next 18 months and will offer payments to businesses that terminate their franchise deals. Corker says GM dealers will face similar challenges to Chrysler in meeting their costs.

Both GM and Chrysler are operating in bankruptcy under government subsidies and Corker said dealers should be made whole for inventory, parts and other financial obligations to the automakers.

Dealerships buy vehicles from the manufacturers and sell them to consumers.

Reporting by John Crawley and Jeremy Pelofsky

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