GM, Chrysler under new pressure over U.S. dealer cuts

By John Crawley

WASHINGTON (Reuters) - Congressional leaders on Wednesday pressed General Motors Co and Chrysler to resolve complaints about dealer franchise terminations the automakers pushed through during their brief bankruptcies.

The Senate's No. 2 Democrat, Richard Durbin, and his counterpart in the House of Representatives, Steny Hoyer, organized a series of closed door Capitol Hill meetings attended by senior aides, the Obama administration and dealer groups.

"While I have not foreclosed the option of supporting a legislative solution to address these concerns, I believe very strongly that these issues can and should be resolved outside of the legislative process," Durbin wrote in a recent letter to the chief executives of GM and Chrysler.

GM plans to drop 1,300 dealers by 2010 and Chrysler has already cut 789. Both companies' plans were approved by bankruptcy courts.

Hundreds of dealers that have lost or are losing business with GM and Chrysler have looked to Congress to help them win back their franchise rights, which they contend were violated in bankruptcy court.

GM, which is 60 percent government-owned, says it is compensating businesses, many of them family-owned, that no longer will sell their vehicles.

GM could pay up to $600 million to terminated dealers. Several dozen of them avoided closure after appealing to the company.

Chrysler, which is run by Italy's Fiat, did not permit dealers to appeal and offered tougher closure terms. Taxpayers have an 8 percent stake in Chrysler.

Neither company would talk about proposals made at the meetings.

"As part of the dramatic restructuring of all aspects of its business, GM fully recognizes the painful sacrifices dealers are also making," GM spokesman Greg Martin said.

Chrysler said the issues are difficult but the company would continue talking.

The Treasury Department oversees more than $60 billion in taxpayer equity tied up in both companies as well as a task force that reviews GM and Chrysler's strategic plans. An agency watchdog is reviewing the dealership closings.

Officials for a trade association representing dealerships could not immediately be reached for comment.

(Reporting by John Crawley; Additional reporting by Tom Ferraro; Editing by Gary Hill)