WASHINGTON -- Arbitrators who are likely to consider reinstatement cases filed by rejected General Motors Co. and Chrysler Group dealers should focus in part on what is good for the companies' long-term financial health, says the Senate's assistant majority leader.
Sen. Dick Durbin, D-Ill., an architect of the legislation that passed Congress, gave his interpretation of the measure yesterday on the Senate floor in response to questions from Sens. Carl Levin and Debbie Stabenow, both Michigan Democrats.
Durbin also said arbitrators should examine whether the reinstatement of a dealer would increase returns on the government's investment in the automakers.
"In making decisions about the makeup of the dealership network, profitability in terms of new-vehicle sales for that manufacturer is what is critically important to the long-term financial health of the manufacturer," Durbin said. "That manufacturer's long-term health is also vitally important to the federal government because of the significant taxpayer investment in these companies."
Durbin, who was cool to some of the rejected dealers' lobbying requests, crafted the legislation along with House Majority Leader Steny Hoyer, D-Md., who was more of an advocate for the dealerships.
The writers of legislation sometimes offer their intent on the House or Senate floor in an attempt to guide interpretation of a new law when it goes into effect.
Durbin made his remarks before the Senate voted 57-35 yesterday to send the bill to President Barack Obama for his expected signature.
Obama's approval will trigger a 6½-month arbitration process, beginning with letters from GM and Chrysler informing rejected dealerships of their arbitration rights and the reasons they were marked for termination.
The legislation calls for arbitrators to "balance the economic interest of the covered dealership, the economic interest of the covered manufacturer and the economic interest of the public at large" in considering seven criteria.
One of the criteria addressed in Durbin's remarks is the dealership's profitability over the past four years, and another is the store's overall business plan.
Dave Cole, chairman of the nonprofit Center for Automotive Research in Ann Arbor, Mich., said Levin and Stabenow probably were trying to elicit remarks favorable to the automakers. Durbin's response was likely intended to guide arbitrators to tilt more toward the car companies, but it probably will backfire, Cole said.
"Arbitrators may come to realize that what is favorable to the dealers is favorable to the car companies," Cole said. "Company sales are tied to the number of dealerships. The more sales they have, the quicker the government will realize a return."
The National Automobile Dealers Association had a similar comment.
"The long-term health of the manufacturer and the dealership network are inextricably linked," the group said in a statement.
Confident in legislation
The Committee to Restore Dealer Rights, the dealer group that pushed most aggressively for the legislation, said Durbin's interpretation would not be as important to arbitrators as the language of the law.
"We are very confident that the legislation will result in equitable treatment of the terminated dealers who lost their franchises this year," the committee said.
A GM spokesman declined to comment today, and a Chrysler spokeswoman did not respond to a request for comment.
In June, then-GM CEO Fritz Henderson told a House panel that planned closures of 1,350 dealerships by October 2010 would save the automaker $2 billion in costs, or $928,000 per dealer. The Committee to Restore Dealer Rights has disputed those savings estimates.
Chrysler eliminated 789 dealerships, or a quarter of its dealer network, during bankruptcy proceedings last spring.
The federal government has obligated $49.5 billion in aid to GM and $12.5 billion to Chrysler as of Nov. 26, according to a Treasury report last week.