Easing the Burden on Closing Auto Dealers, Employees, & Communities
On May 13, 2009, Russell Aubrey Whatley received a letter that would change his life. In the perfunctory letter, Chrysler informed Mr. Whatley that he would have less than a month to close down the dealership his family has profitably operated for three generations. His business has contributed to the livelihood of Mineral Wells, Texas through commerce and community involvement for the last 90 years.
The Russell Whatley Motor Company - one of the oldest car dealerships in Texas - was not the only business to find itself dragged into the worsening predicament of the U.S. auto industry, most recently punctuated by the bankruptcies of Chrysler and General Motors. Across Texas, 50 Chrysler dealers have been slated for closure. Nationwide, 789 dealers are being forced to close their doors - through no wrongdoing of their own. They did not make the business decisions that have placed the domestic auto industry in this position.
In fact, when ailing Chrysler in February urged its dealers to purchase additional inventory in a final, futile attempt to stave off bankruptcy, most of the dealers complied. And many of those who were subsequently terminated were flush with inventory Chrysler executives pushed them to buy, potentially burdening them with significant losses.
Upon learning of Mr. Whatley and other Texas dealers' plight, I was shocked that Chrysler could dismiss these loyal dealers, with whom the company had partnered for so many years, with little concern for the well-being of the employees, customers, and communities they serve. I disagree that these profitable dealers should close at all. On May 21, I introduced an amendment to deny Chrysler additional Treasury funding, which it has been receiving to help maintain solvency, unless it gave dealers slated for closing adequate time to do so. In a matter of hours, my colleagues signed on to the legislation until we had 39 Senators from both sides of the aisle calling for equitable treatment of the terminated dealers. Our calls were heeded when the Chrysler CEO Jim Press personally assured me that Chrysler was taking steps to help automotive dealers across the country.
This was a welcome development, but as Ronald Reagan was known to say, "Trust. But verify."
As Senior Republican on the Senate Commerce Committee, I worked with Chairman Jay Rockefeller to verify that Chrysler would, indeed, provide each impacted dealer ready access to necessary resources to close down its operations with as little pain as possible under the circumstances. On June 3, we held a committee hearing in which Mr. Press and GM CEO Fritz Henderson testified alongside the very dealers they were dismissing, including Mr. Whatley.
Mr. Whatley made it clear in his testimony that Chrysler's decision to discontinue its relationship with him was not just the failure of a business venture. For him and his family, it was the end of three generations of personal investment and enterprising spirit. He said, "My grandfather opened this dealership in 1919, and it kept open during the Depression, World War II, and countless economic setbacks. In the 90 years that we have been [in Mineral Wells], 36 other new car dealerships have come and gone in our town. We have stayed open because we are committed to customer service. To be arbitrarily closed with no compensation is wasteful and devastating."
During the hearing, I probed Chrysler's actions on two critical points. First, would Chrysler repurchase or help redistribute the cars left on closed dealers' lots and remaining parts inventory? And second, would closed dealers receive first consideration for buying into a new dealership if Chrysler reentered their markets? Mr. Press pledged at the hearing that dealers could count on Chrysler's help as they closed, and on June 12 I received formal assurances in a letter. He confirmed that 100 percent of closing dealers' inventory will be purchased at cost, minus a $350 fee, and Chrysler will work with closing dealers to redistribute or buy back remaining parts inventory. Furthermore, if Chrysler elects to reenter the Mineral Wells market, for example, Mr. Whatley will have first consideration for the new dealership.
Ultimately, what Chrysler has promised me is not nearly as important as the promises Chrysler must honor for its closing dealers, 50 of which are in Texas: a fair process that will limit the economic damage on businesses and the communities they have faithfully served. Amidst our nation's economic hardships, many are being called upon to make tough decisions. But there are right ways to do things, and there are wrong ways. In October, General Motors will close 1,300 of its dealers. I hope that the challenges we have faced with Chrysler will guide the actions of GM's executives as well.
Kay Bailey Hutchison is the senior U.S. Senator from Texas and the Senior Republican on the Senate Committee on Commerce, Science, and Transportation.