By Peter Marcus, DENVER DAILY NEWS
Two state lawmakers are “imploring” Chrysler LLC and General Motors Corp to reinstate 29 terminated Colorado franchise agreements.
In letters sent at the end of last month to the president of Chrysler and chief executive of GM, Sen. Chris Romer, D-Denver, and Rep. Joe Rice, D-Littleton, said it was unfair to terminate the agreements because dealers are “profit centers, not cost centers.”
“The majority of the terminated Colorado dealers and their families have loyally and faithfully represented your respective brands for generations and have made significant, if not monumental, financial investments for the benefit of your company and its products,” wrote the two lawmakers in separate but similar letters to the auto executives. “The fact that (Chrysler and GM) would terminate these dealers with minimal notice and a total lack of just compensation for their investment flies in the face of Colorado’s motor vehicle statutes and all measures of fairness and justice.”
The two auto giants have said that their dealer networks are too large and that they can’t support the number of dealers operating across the country. Chrysler has shut down 14 dealers in Colorado, and GM has shut down 15.
“The entire automotive industry has shrunk, and the number of dealers out there — with the smaller size of the automotive industry — it can’t support the number of dealers,” said Chrysler spokeswoman Carrie McElwee in a recent interview with the Denver Daily News. “We really want our dealers to be able to service customers the best way possible, and in order to do that, they need to be profitable.”
Not buying it
But Rice and Romer don’t buy the argument. They point out that dealers provide as much as 90 percent of the manufacturers’ revenue.
“Automobile dealers are not a cost center for your company in any way,” they wrote in their letters. “In fact, they are profit centers. Dealers are assets, revenue producers, and the only mechanism under which your company can sell its products.”
The two lawmakers pushed successful legislation this year, Senate Bill 91, which provides more protections to auto dealers in the event they go out of business.
“(We) sponsored this bill to protect automobile dealers from precisely the actions that have been taken by (Chrysler and GM) and to shield our dealers from the arbitrary and uncompensated terminations of our state’s high performing dealers,” wrote Rice and Romer in similar letters.
Worried about impact
The two lawmakers are also concerned about the impact the closures will have on the Colorado economy, including extensive job losses and a significant loss of tax revenue to local municipalities and the state.
Sales and service of new and used vehicles in Colorado accounts for about 20 percent of the total sales tax revenue for the state, according to the Colorado Automobile Dealers Association.
Colorado law ensures that when manufacturers shut down a dealership, they must pay rent on a dealer’s business property for one year; pay the goodwill value of the dealership; and buy back inventory and parts of a terminated dealer. But because the two companies have filed for bankruptcy protection, they are not obligated to honor those laws, said the dealers association.
Local dealers may also have a friend in Congress. Rep. Ed Perlmutter, D-Lakewood, recently wrote to Rep. Barney Frank, chair of the House Financial Services Committee, as well as to Rep. John Conyers, chair of the House Judiciary Committee, urging them to hold a joint hearing to discuss the impact auto manufacturer restructuring plans may have on dealers.
Perlmutter would like to “explore ways to cushion the blow for the affected dealerships, suppliers and pensioners,” he said in a news release.
Meanwhile, Rice and Romer are hoping to convince Chrysler and GM to reverse their termination decisions in Colorado.
“(We) hereby implore you to reinstate the franchise agreements of the Colorado automobile dealers that were subject to your recent terminations,” they wrote in similar letters. “In the alternative, should you fail to reinstate the subject franchise agreements, we call on you to provide Colorado automobile dealers with the termination assistance guaranteed under Colorado law.”
Distributed by Colorado Capitol Reporters
