WASHINGTON -- The Obama administration said today it strongly opposes legislation to reverse terminations of thousands of General Motors and Chrysler auto dealerships by bankruptcy courts.
The provision, which has 243 sponsors and co-sponsors in the 435-member House, is due to come up for a House vote tomorrow as part of the fiscal 2010 financial-services spending bill.
Its going to pass by a wide margin, predicted Rep. Steven LaTourette, R-Ohio, a sponsor.
The White House issued a Statement of Administration Policy saying that the dealer cuts at GM and Chrysler were a critical part of their overall restructuring to achieve long-term viability.
It would set a dangerous precedent, potentially raising legal concerns, to intervene into a closed judicial bankruptcy proceeding on behalf of one particular group at this point, the statement said.
If the spending bill passes, it will go to the Senate, where a similar measure has 24 sponsors and co-sponsors.
The bills have spurred recent talks involving representatives of GM and Chrysler and some key lawmakers about a possible alternative to the dealer cuts that would head off the legislation.
Spokesmen for both GM and Chrysler said Tuesday that the automakers are open to nonlegislative alternatives. Rep. Chris Van Hollen, D-Md., a participant in the negotiations, said the White House also is open to a deal.
The talks are at an early stage, and no specific proposal has been put forth, participants said.
LaTourette said today that a settlement would be preferable to the legislation he has sponsored.
The purpose of my bill was to keep the pressure on the parties to work something out, he said in an interview. I always think an agreement is best.
The legislation would restore dealers to their status before GM and Chrysler filed for bankruptcy this spring. If the companies wanted to continue with the terminations approved in Bankruptcy Court, they would have to go through state courts.
GM has announced plans to reduce dealerships from 6,000 to about 3,600 by the end of 2010. Chrysler has terminated 789 stores, or a quarter of its total.
The administrations position is not a surprise as it has loaned or agreed to loan a total of $65 billion to GM and Chrysler to rescue them from bankruptcy.
The government owns 60 percent of the new GM and 8 percent of the new Chrysler.
The administrations legal concerns were echoed in a Chrysler document distributed to all House and Senate offices Tuesday.
Chrysler contended that the Constitution provides Congress with the authority to establish uniform laws on the subject of bankruptcies.
The legislation, however, affects only GM and Chrysler rather than bankruptcies involving all automakers, the six-page Chrysler document argued.
The proposed legislation appears to be nothing more than a private bill that seeks to alter the terms of the Chrysler and GM bankruptcies, Chrysler said.
The bill also would require the new Chrysler to increase its dealer network by 33 percent at a time when the companys sales volume is less than two-thirds of the volume of the old Chrysler, the document contended.
That would raise the companys costs by $2.1 billion a year for the next four years, Chrysler argued.
GM made public its own cost analysis that said the bills would add $2.5 billion in costs over a period of time. Those costs include dealer support, local advertising assistance, service and training, and information technology systems, the document said.