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WASHINGTON — The inspector general for the Treasury Department's $700 billion bailout fund said Thursday that he will review the decisions of General Motors and Chrysler to close a large portion of their auto dealerships as part of their restructuring plans.
Neal Barofsky told the Senate Banking, Housing and Urban Affairs Committee that he will audit the process the two automakers used when they decided to significantly shrink their base of dealerships earlier this year. The companies said the closures were necessary to cut costs and better align their business with lower consumer demand.
GM is reducing its 6,000-dealer network by about 2,400 dealerships by the fall of 2010 by not renewing franchise agreements and winding down stores with outgoing brands. Chrysler slashed 789 dealers as part of its bankrutpcy proceedings this summer, leaving it with about 2,400.
Auto dealers have opposed efforts by GM and Chrysler to pare back their dealer networks and backed legislation approved in the House that would force the Detroit companies to restore the shuttered dealers.
The Senate has not yet considered the plan. Illinois Sen. Dick Durbin, the Senate's No. 2 Democrat, urged GM and Chrysler in separate letters last week to negotiate with dealers to address their concerns. "I believe very strongly that these issues can and should be resolved outside of the legislative process," Durbin wrote.
The Obama administration, which has sunk nearly $60 billion in loans into GM and Chrsyler, has backed the companies' plans to pare their network of dealers and has urged Congress not to meddle in the process.
Barofsky, who is the inspector general for the Troubled Asset Relief Program, or TARP, also said his office will audit companies in which the government holds a larger ownership stake. That includes reviewing the government's role in managing those companies and how it plans to eventually wind down its investments in the organizations.
Barofsky's testimony did not specifically mention GM or Chrysler, but the government owns roughly 60 percent of GM and 8 percent of Chrysler.
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Associated Press Writer Ken Thomas in Washington contributed to this report.
