Senators want automakers to give car dealers adequate time and fair compensation in closing down

June 12, 2009

WASHINGTON, D.C. - Florida U.S. Sen. Bill Nelson wants bailed-out automakers GM and Chrysler to compensate car dealers who have been told to close. 

Nelson, joined by Sen. Bob Corker, of Tennessee, has filed legislation to require the two automakers to reimburse the dealers for inventory and parts they bought since last fall.   They introduced the bill yesterday.

“I am hearing from a number of my constituents in Florida about the recent dealership closings by Chrysler and General Motors.  They’re concerned about the seeming arbitrary nature of such highly important decisions,” Nelson said.  “There are 33 Chrysler and at least six GM dealerships closing in Florida alone.  And they deserve to be fairly compensated.”

“We continue to hear example after example of GM and Chrysler not reimbursing their dealerships for parts and inventory as they have agreed to do. We understand that a bankruptcy is inherently painful and our efforts aren’t to interfere. We introduced this bill to keep pressure on the automakers to keep their word to rejected dealerships and fully reimburse them for the inventories of vehicles and parts purchased over the past nine months, and we continue to hope Chrysler and GM will take these appropriate actions and make this bill unnecessary,” said Corker.

The Corker-Nelson legislation would:

(1) Require Chrysler and GM to use a portion of the funding received from the U.S. Treasury while in a Chapter 11 bankruptcy to fully reimburse all rejected dealers for: (a) the cost of all parts and inventory in the dealer’s possession purchased in the nine months preceding the date of the bankruptcy filing, treating them the same as if the dealers chose to terminate their existing franchise agreements or dealer agreements; and (b) all other obligations owed by Chrysler or GM under franchise agreements or dealer agreements.

(2) Allow rejected Chrysler and GM dealers a minimum of 180 days to shut down their businesses and sell off their inventories through the creation of a “wind down period.”

The bill also specifies that a bankruptcy court cannot allow Chrysler and GM to obtain access to debtor-in-possession funding unless the credit agreement(s) expressly provide for the above treatment of the dealers.

The bill has been referred to the Senate Judiciary Committee.

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