Look Out, Congress Has Its Back Up Over Auto Dealers …

Personally, I believe the president when he says he never wanted to be in the car business.   I fully expect that the White House will unwind taxpayers from stakes in car companies long before we are completely and safely out of Uncle Sam’s positions in banks and other financial services companies.

Congress on the other hand, these guys scare me.

The great strength of Congress is that local and regional representations may be made concerning public policy.  That parochial nature of the legislature is also its greatest weakness.  There are some big picture things that we need members of Congress to quash their urges to consider merely on the merits of “How does this affect my district?”

Today the Senate Commerce Committee will hold hearings on U.S. auto dealers affected by right-sizing efforts underway by Chrysler and GM.  Autodealers will claim something terrible has happened and Senators – especially those whose campaigns are partially funded by fat cat car salesmen – will wring their hands and agree.

If the politics stops here with a show of indignation and gnashing of teeth, we’ll be O.K.  If the show gets a run in the House, then the trouble starts.  Members of the House, with their ultra-parochial world view could end up with legislation attempting to reverse dealership closings by the automakers, or worse yet, extending dealers some sort of bailout.  The bailouts need to remain at the macro level of the economy.  All we need is 435 bailout plans for this and for that.

Reuters reports ahead of today’s hearing what the national organization representing car dealers will say:

General Motors Corp and Chrysler LLC, both bankrupt, will try on Wednesday to ease congressional concern, and in some cases anger, over their plans to slash more than 2,400 dealerships.

Members of the Senate Commerce Committee plan to grill GM Chief Executive Fritz Henderson and Chrysler President Jim Press about the lone aspect of restructuring that has triggered a broad response from Congress since dealers are nationwide.

“Rapid dealer reductions increase unemployment, threaten communities and decrease state and local tax revenue without any material corresponding decrease in an automaker’s costs,” said John McEleney, chairman of the National Automobile Dealers Association who sells vehicles made by GM, Toyota Motor Corp and Hyundai Motor Co in Iowa.

We can’t dispute what McEleney says about the economic impact of auto dealers.  I’ve heard reported that the average employment of a new car dealership is around 50 to 60.  The point behind the pain being felt by anyone connected with the U.S. auto industry today – from boardrooms to union halls – is that the whole system was bloated.  Everyone is taking a hit.  If the industry is to regain any semblance of health, everyone needs to take a hit.

Here’s hoping Congress doesn’t try to micromanage the U.S. government’s temporary investment in the auto industry.  We elected the president to be the executive and too many competing interests pushing for setting aside the hard choices for interest groups will just water down the whole enterprise.  What Congress should be doing is oversight.  The auto dealers shouldn’t be on the Hill today, the Administration and the top management of GM should be on the Hill today explaining what this all looks like in six, twelve and 24 months.