Who's Driving the Car (Companies)?

The quick emergence of GM and Chrysler from bankruptcy has been viewed as a victory for the Obama Administration in demonstrating that the government is focused on moving the companies through their restructuring and keeping them on the road to once again being private companies. Now a majority of Members of the House, including two key Democratic leaders, are pushing legislation that could jeopardize the restructuring plans supported by the White House.

As we write this, a bipartisan group of 240 House Members and 20 Senators are supporting legislation that will allow auto dealers who have lost their franchises in the restructuring to recover them simply by requesting their reinstatement from the auto companies. The legislation was attached to the House version of the Financial Services Appropriations bill last week by a unanimous vote of 60 to 0. The legislation would require Chrysler and GM, at the request of an auto dealer, to restore the dealer franchise agreement in effect prior to each manufacturer’s bankruptcy proceeding. The bill could save around 2000 franchises according to some estimates, although that may be high, since many dealers have already closed. Some had feared the House Rules Committee would remove the language from the Financial Services Appropriations bill, but the language will remain in section 745 of the bill when the House votes on the measure tomorrow.

The fact that two key Democratic leaders—Majority Leader Steny Hoyer (D-MD) and Chair of the Democratic Congressional Campaign Committee Chris Van Hollen (D-MD)—support this legislation has given Democratic members of the House all the cover they need to buck the Obama Administration on this issue. The fact that they have demonstrated the effectiveness of the dealers, who fanned out on Capitol Hill yesterday to plead their case.

Will cooler heads prevail in the Senate? On that side, the germaneness rules may help opponents of this legislative maneuver keep this legislation off the appropriations bill. Our guess is that this provision will have a difficult time surviving the legislative process. However, the fact that it has gotten this far demonstrates the restiveness of Democratic Members in particular as they wait for evidence that stimulus is working and that the improvements in the financial sector are benefitting their constituents. This same restiveness may re-appear on other issues as the legislative process continues on financial services restructuring and other issues.

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