Opening Statement
Rep. Blaine Luetkemeyer
Ranking Member Subcommittee on Rural Development, Entrepreneurship, and Trade
House Committee on Small Business
Hearing: Economic Impact of Auto Dealer Closings on Rural Communities
September 16, 2009

 
 Good morning. Thank you, Mr. Chairman, for holding this hearing to examine the impact of the auto dealer closings on rural communities.  I’d like to extend a special thanks to each of our witnesses who have taken the time to provide this Committee with their testimony. 
 
This is undoubtedly difficult issue to examine.  The health of the American auto industry is directly tied to the economic health of our nation.  On a smaller scale, but no less important, the financial well being of local auto dealerships (especially in rural areas) is very closely tied to the economic health of our small towns and farm communities.

Automobile manufacturers rely on an extensive network of approximately 20,000 independently owned dealers for sales and service of their vehicles.  Dealers provide the local connection between manufacturers and car buyers, and the dealership system is one of several key players in the complex web of relationships that make up the U.S. automobile industry.

While there is a consensus about the overall role and value of the dealer network, manufacturers and dealers have demonstrated that there is a wide gulf between them on the appropriate size of that network, the flexibility of the dealerships in running their business, and the GM and Chrysler visions of how the dealer network should perform going forward.  In June 2009, Chrysler eliminated 25 percent of its dealer network—789 dealers.  GM has announced it will reduce its dealer network from 6,000 to approximately 3,600 in October 2010 when its contracts with dealers from around the country are up for renewal.  According to the National Automobile Dealers Association (NADA), the GM and Chrysler dealerships slated for elimination have more than 100,000 employees. 

 This is a very important issue, especially for Members who represent rural areas, where there may be only one or two GM and/or Chrysler dealerships to serve one or more counties.   This could lead to drive times (or tow times) of well over an hour or more to get service done.  Additionally, given the dismal employment statistics we have been seeing for well over a year now, this restructuring, while hopefully benefitting the nation as a whole in the long-term, will undoubtedly increase the numbers of unemployed workers.

Clearly, closing dealerships will translate into job loss and an economic hit to many regions, particularly rural ones.   The broader impact on the communities they serve must also be taken into consideration.  For example, car dealerships are local businesses and pay billions annually in state and local taxes.  They provide significant employment opportunities to the communities in which they operate.  In addition, on average, each dealership makes $25,600 in charitable contributions to its community, according to the National Automobile Dealers Association.  From monetary donations to local charities to sponsoring the local little league team, these activities, while often harder to quantify, make dealers an integral part of their communities.

I am looking forward to hearing today’s testimony.  Again, I would like to thank Chairman Shuler for holding this hearing and everyone for being here.  I yield back.