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Today July 19,2010 the Office of the Special Inspector General for the Troubled Asset Relief Program (TARP) released the results of an audit report regarding the bailouts of General Motors and Chrysler Corporation using taxpayer funds and the Government’s decision to accelerate the forced closing of thousands of auto dealerships. The results of the audit regarding these dealership closings are summarized as follows:
“Pursuant to their loan agreements with Treasury, as a condition of receiving additional TARP funding, GM and Chrysler were required to submit restricting plans to the Treasury Auto Team in February 2009. GM’s restricting plan explicitly spelled out its plan to reduce its dealership network gradually, by approximately 300 dealers per year over the next five years. In March 2009, Treasury’s Auto Team rejected both companies restricting plans. In GM’s case, the Auto Team specifically highlighted GM’s planned “pace” of dealership closings as one of the obstacles to its viability. In response to the Auto Team’s rejection of their restructuring plans and in light of their intervening bankruptcies, GM and Chrysler significantly accelerated their dealership termination timetables, with Chrysler terminating 789 dealerships by June 10, 2009, and GM announcing plans to wind down 1,454 dealerships by October 2010.”
The report in its summary goes on to detail how the Treasury’s Auto Team, a group appointed by President Obama, felt that it was necessary to accelerate closings of dealerships, however there was no explicit cost savings in mind to the manufacturers. The Auto Team also did not think the loss of dealership jobs was a factor in their decision. According to the audit report, “tens of thousands of dealership jobs were clearly put in jeopardy as a result of the terminations by GM and Chrysler.” Further, the report stated that which dealerships would be closed was determined in an ad hoc and vague manner. While Chrysler appears to have adhered to its stated, however subjective criteria, “GM did not consistently follow its stated criteria and that there was little or no documentation of the decision-making process to terminate or retain dealerships with similar profiles, or of the appeals process.”
Thousand of auto dealerships were arbitrarily closed with tens of thousands of jobs lost, during what the Obama Administration has called the greatest crisis since the Great Depression, with no rhyme or reason. Washington bureaucrats and power brokers deciding the fate of thousands of private businesses based upon some murky calculation. This is “hope and change” at its worst.