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Congress passes law requiring reinstatement of dealers

by David Zatz on

Spending bill H.R. 3170RH, passed by a narrow margin by Congress, included an amendment which read:

SEC. 745. (a) None of the funds made available in this or any other Act may be used to obtain a financial or ownership interest (or right to acquire such an interest) in an automobile manufacturer that deprives an automobile dealer of its economic rights under a dealer agreement and does not assume (or assign to a successor in interest) each dealer agreement which is valid and in existence (and has not been lawfully terminated under applicable State law) before the date of the commencement of a case under title 11 of the United States Code by such automobile manufacturer.

(b) Any automobile manufacturer with respect to which the Federal Government has a financial or ownership interest (or right to acquire such an interest) shall, to the extent that a valid dealer agreement existing immediately before the date of the commencement of a case under title 11 of the United States Code by such automobile manufacturer is not assumed by or assigned to another automobile manufacturer, require any new entity created in such case to enter into a new dealer agreement with the dealer whose agreement was not so assumed or assigned, and on the same terms as existed immediately before such date.

This amendment is somewhat less severe than the proposed H.R. 2743, which would apparently allow dealers to sue Chrysler and General Motors as well as reinstating them.

dealership.jpg

While Congressmen have made numerous public statements claiming that auto dealers do not carry any costs, Chrysler finally issued releases which describe substantial advertising, marketing, and support costs for each dealership, which would be required under the wording of the amendment, straining their limited resources. Examples of dealerships that used domestic cars to sell imports (to attract customers who would then be diverted) were brought up by some news media, and the problems of dealerships with shoddy service departments giving the automakers a poor reputation for quality were reportedly not mentioned on the House floor.

To reject this provision, assuming a similar provision is approved by the Senate, President Obama would have to reject the entire spending bill.

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