Federal Watchdog : Rapid Decrease in Auto Dealers

According to a Federal watchdog, Treasury Department failed to consider the economic fallout when it told General Motors and Chrysler to quickly shutter many dealerships as part of government-led bankruptcies.

The General Motors and Chrysler had to submit restructuring plans to the Treasury’s Auto Team in February 2009. Their plans were rejected as the Treasury deemed that the car makers were not closing dealerships at a rate fast enough to make their businesses viable.

By October 2010, Chrysler had to terminate 789 dealerships last summer and General Motors announced to terminate 1,454 dealerships.

According to the report and audit, the dealerships were not only pulled down for money-saving ventures for the manufacturers but also for many other reasons.

The GM and Chrysler had radially different cost estimates. According to GM, the dealership terminations would likely save much amount as $2.6 billion, or $1.1 million per dealership. According to Chrysler, it would save $35.8 million or $ 45,501 per dealership.