The Obama administration's request that General Motors and Chrysler Group accelerate the closing of U.S. dealerships probably was unnecessary and may have added to unemployment, a government watchdog said.
The United States "should have at least considered" whether the benefits of speeding up the closings outweighed costs from a potential loss of tens of thousands of jobs, according to the report by Neil Barofsky, , special inspector general for the Troubled Assets Relief Program. The Treasury Department rejected the automakers' reorganization plans in March 2009, in part citing GM's "slow pace" in scaling back its dealer network.
"Such dramatic and accelerated dealership closings may not have been necessary and underscores the need for Treasury to tread very carefully when considering such decisions in the future," Barofsky said.
Treasury, which has committed $80.7 billion to the two carmakers under the TARP program, criticized the report and said that without the government assistance both companies faced failure and liquidation.
"We strongly disagree with many of your statements, your conclusions and the lessons learned," said Herbert M. Allison Jr., assistant Treasury secretary for financial stability.
The report prompted further criticism from Republicans in Congress, who faulted the government's role in making decisions about the business plans for Detroit-based GM and Auburn Hills, Mich.-based Chrysler.
"This sobering report should serve as a wake-up call as to the implications of politically orchestrated bailouts and how putting decisions about private enterprise in the hands of political appointees and bureaucrats can lead to costly and unintended consequences," said Rep. Darrell Issa (Calif.), ranking Republican on the House Committee on Oversight and Government Reform.
The report found that Chrysler, which made decisions on a case-by-case basis, followed the criteria for targeting dealers for termination. GM was inconsistent and retained more than 1,300 dealers that would have been shut based on sales, consumer satisfaction and profitability, according to the report.
Congress members had been complaining that the terminations were unfair and will cost jobs in their districts. (Continues here)