Closing car dealerships is turning into a political football

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Sen. Olympia Snow, the low-key Maine Republican, is livid that bankrupt General Motors (GM) and Chrysler L.L.C. are slashing their dealer networks, leaving thousands of people out of work. Her anger is typical.

In remarks before the U.S. Senate, Snow lamented the decisions of GM to cut 1,100 dealers and Chrysler to axe 789 dealers. She said these businesses -- many of which are politically powerful -- were "disenfranchised arbitrarily. It's a very heavy-handed approach."
Unfortunately, it was also very necessary, according to the automakers.

In his testimony, GM CEO Fritz Henderson told the Senate that GM had no choice but to slim down its inefficient network, which grew during the 1950s and 1960s when the automaker had a dominant position. The company now has "too many dealerships and in many cases in the wrong places," he said.

Chrysler President James Press, defended its dealer cuts, arguing the bankrupt automaker employed a "rigorous , robust and rational" process. "They were gut wrenching but absolutely necessary for Chrysler' s survival."

One of the few things that most experts agree upon is that there are way, way too many dealers. Whose fault that is remains open to debate. Both General Motors and Chrysler seems to have encouraged dealers to take on more vehicles or make improvements to their dealerships. Members of the Senate also argued that Chrysler are not giving dealers enough time to wind down their businesses.

"This is painful," said Sen. Claire McCaskell, D-MO, at the hearing. Without the bankruptcies "two giant American manufacturers would cease to exist."

This remind me of the debate over the closing of excess military bases during the 1990s. That process got bogged down in a convoluted process as people debated over the potential job losses. I fear that something similar will happen with surplus car dealers.
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