Inspector General Criticizes Treasury's Role In GM, Chryslsr Dealer Closures

07/18/2010 04:07 pm ET | Updated May 25, 2011

A government watchdog is criticizing the Treasury Department for urging General Motors and Chrysler to quickly reduce the size of their dealership networks -- a move that cost jobs during the recession.

The special inspector general for the government's bailout program says the Treasury didn't do enough to make sure that speeding up those closings was necessary for the companies' long-term health.

"At a time when the country was experiencing the worst economic downturn in generations and the government was asking its taxpayers to support a $787 billion stimulus package designed primarily to preserve jobs, Treasury made a series of decisions that may have substantially contributed to the accelerated shuttering of thousands of small businesses and thereby 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 states.

"In response to the [Treasury Department] Auto Team's rejection of their restructuring plans and in light of their intervening bankruptcies, GM and Chrysler significantly accelerated their dealership termination timetables, with Chrysler terminating 789 dealerships by June 10, 2009, and GM announcing plans to wind down 1,454 dealerships by October 2010."

"Job losses at terminated dealerships were apparently not a substantial factor in the [Treasury Department] Auto Team's consideration of the dealership termination issue."

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