Dealer-closure audit may signal focus of U.S. probe

Neil Roland is a Washington reporter for Automotive News
WASHINGTON -- What clues might a July audit offer into the federal investigation of possibly illegal actions during the General Motors and Chrysler dealership terminations last year?

The office of the Special Inspector General for the U.S. Troubled Asset Relief Program (SIGTARP) says its investigators are looking into possible legal misconduct but won't say who or what they are looking at.

However, investigators have been given the files of auditors in the same office that compiled a July report critical of the handling of dealer cuts by the Obama administration, GM and Chrysler.

A review of that report suggests concerns of auditors that might also highlight areas under scrutiny in what the office's spokeswoman has described as a “follow-up” investigation.

Here are verbatim excerpts:

• “The disparity in the companies' cost-savings estimates are telling. Chrysler estimated a savings of only $45,500 per terminated dealership. GM, however, estimated cost savings of $1.1 million per terminated dealership. The difference in these estimates alone casts doubt on their credibility.” (Page 30 of report)

• “GM did not consistently follow its stated criteria. In the first phase, for example, two of the terminated dealerships did not fit into either termination category, and GM retained 364 dealerships that potentially qualified for termination. In phase two, GM terminated 39 dealerships that did not meet any of the objective criteria and retained more than 1,062 dealerships that met one or more criteria for termination.” (Page 30)

• “Just as troubling, there was little or no documentation of the decision-making process to terminate or retain dealerships with similar profiles, making it impossible in many cases for SIGTARP to determine the causes of deviations from the supposedly objective criteria. Similarly, although GM did have an appeals process and granted 64 reversals in cases of dealerships that would have been completely wound down, it failed to set the criteria or process for appeals or to document its reasoning for granting or denying appeals.” (Page 30-31)

The audit, which had a broader mission than the investigation, does not question the legality of any of these actions -- making it impossible to draw any conclusions.

It's also worth noting that in U.S. jurisprudence, everyone involved in an investigation is innocent until proven guilty.

Still, if nothing else, the auditors flagged unanswered questions that they felt have not been adequately addressed by the main actors.