Report questions Treasury Department's handling of auto restructuring

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A report from a U.S. federal watchdog says the Treasury Department failed to consider the “economic fallout” with it told General Motors and Chrysler to close dealerships in Canada and the U.S. last year.

The Associated Press is reporting the audit, by Neil Barofsky, special inspector general for the Troubled Asset Relief Program, says that the Treasury failed to demonstrate why cuts were “either necessary for the sake of the companies’ economic survival or prudent for the sake of the nation's economic recovery.”


The news agency says the report, released Sunday, raises questions about whether President Obama’s auto task force considered the massive job losses the dealership decision would bring while it pressured both automakers to cut costs.

“Treasury made a series of decisions that may have substantially contributed to the accelerated shuttering of thousands of small businesses…” resulting in “potentially adding tens of thousands of workers to the already lengthy unemployment rolls – all 
based on a theory and without sufficient consideration of the decisions’ broader economic impact,” the report said.



Federal officials have said they “strongly disagree” with the report’s findings, adding that the audit is pinpointing one specific move in the large restructuring plans. 


“The audit also found that General Motors ‘did not consistently follow its stated criteria’ for reducing its dealer network and noted that Chrysler failed to offer an appeals process,” the news agency said.

In Canada, multiple lawsuits remain before the courts from deleted GM dealers who say the automaker unlawfully reneged on its dealership agreements or did not provide adequate time to sign the optional winddown agreements handed out last spring. Those decisions saw the GM Canada dealer network shrink from 705 to between 395 and 425.

A statement from GM said details described by the report “have since been overtaken by a new GM and a stronger dealer network to match. More than a year since bankruptcy, GM is showing substantial progress.”

Chrysler has not commented.


- With files from The Associated Press