FI showroom red and grey logo
MenuMENU
SearchSEARCH

Audit Criticizes Task Force, OEMs for Dealer Terminations

An audit prepared by a watchdog agency says last year’s decision by General Motors Co., Chrysler LLC and the Obama administration’s Auto Task Force to terminate franchise agreements with hundreds of dealers was made in haste.

by Staff
July 20, 2010
3 min to read


WASHINGTON — An audit prepared by a watchdog agency says last year’s decision by General Motors Co., Chrysler LLC and the Obama administration’s Auto Task Force to terminate franchise agreements with hundreds of dealers was made in haste. Officials with the Treasury and both OEMs have defended their actions, saying the cuts were made in order to ensure the survival of the automakers at a time when both appeared to be in a free fall.

The terminations were intended to speed the companies through federal bankruptcy, as the process allowed the manufacturers to operate outside the auspices of various state laws that can make breaking franchise agreements prohibitively expensive. The report was prepared by the office of the independent inspector general for the Troubled Asset Relief Program (TARP).

Ad Loading...

The audit’s criticisms largely echo those voiced by affected dealers and industry associations throughout the process; namely, that federal officials pushed the manufacturers into trimming their dealer rosters without considering the long-term impact on jobless rates and the economy as a whole.

“[The] 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 stated, in part. 

Ed Tonkin, chairman of the National Automobile Dealers Association (NADA), agreed.

“The SIGTARP report confirms what was said in NADA’s testimony presented to Congress in several hearings and to the Auto Task Force in multiple meetings,” Tonkin said Monday. “‘We do not see how these cuts make economic sense — not for the companies, not for the dealers, not for local communities and certainly not for the struggling U.S. economy.’”

The audit further stated that GM demonstrated inconsistency in its decisions to retain or terminate individual dealers and found documentation for those decisions lacking. In response to the report, the OEMs both released statements defending decisions made in 2009 and shifting their focus toward rebuilding.

Ad Loading...

“The GM which existed at that time did its best to develop and implement an objective dealer consolidation process under extraordinary circumstances,” the GM statement read, in part. “We appreciate the SIGTARP’s important work to examine the past. But for all of us at GM, our full focus and energy is directed straight ahead.”

Treasury Department officials also went on the defensive, saying job losses should be blamed on the economy, not on dealer closings.

“The Administration’s actions not only avoided a potential catastrophic collapse and brought needed stability to the entire auto industry, but they also saved hundreds of thousands of American jobs, and gave GM and Chrysler a chance to re-emerge as viable, competitive American businesses,” said Herbert Allison, assistant secretary for financial stability at the Treasury Department.

Allison pointed to numbers from the U.S. Bureau of Labor Statistics, which found that 35,300 jobs have been lost in the automotive retail sector since February 2009, a decline of just over 3 percent. The industry lost nearly the same number of workers on the manufacturing side: 32,700 jobs lost in the same period for a decline of 4.5 percent.

Meanwhile, hundreds of disenfranchised dealers have applied for reinstatement with varying degrees of success. Their channel is an arbitration process created by legislation signed by President Obama several months into the bankruptcy proceedings, a move that the audit characterized as second-guessing on the administration’s part.

Ad Loading...

“Job losses at terminated dealerships were apparently not a substantial factor in the Auto Team’s consideration of the dealership termination issue,” the report says. “Although there is some controversy over how many jobs will be lost per terminated dealership, it is clear that tens of thousands of dealership jobs were immediately put in jeopardy as a result of the terminations by GM and Chrysler.”

More F&I

Photo of a three-seat vehicle back seat
F&Iby Hannah MitchellMay 22, 2026

F&I Reaches for the Sky

The increasingly important profit center continued making gains in the first quarter, according to StoneEagle data, ancillary products proving more popular as consumers hold onto their buys longer.

Read More →
Cover image for a BOK Financial report titled “Timing the market: How avoiding volatility entirely can hurt long-term reinsurance program performance.” The image shows several road construction barricades with flashing amber warning lights lined up in a nighttime work zone. Beneath the image, red text explains that avoiding volatility can mean falling behind inflation and missing market rebounds that drive long-term surplus growth. The BOK Financial logo appears at the bottom right.
SponsoredMay 8, 2026

Timing the Market Can Hurt Long-Term Program Performance

For dealer-owned reinsurance entities, avoiding volatility entirely can mean falling behind inflation and missing market rebounds that drive long term surplus growth. Missing just a handful of strong market days can materially impact cumulative returns—an important reminder for long horizon trust and investment strategies.

Read More →
Ryan Ruff, The 90/10 Rule, Automotive Training Academy, Sales Series
F&IMay 6, 2026

The 90/10 Rule

In this video, Ryan Ruff explains the rule that elite sales professionals use to turn ordinary conversations into unforgettable customer experiences.

Read More →
Ad Loading...
Photo of essential oil diffuser on desk next to laptop
F&IMay 4, 2026

Your Office Is Talking

What’s the atmosphere saying about you to your customers? You can make minor adjustments and additions that transform your space into one that creates trust with the people on the other side of the desk.

Read More →
"Effective training ensures the customer’s needs remain at the heart of everything we do. When that is the focus, both sales and profits naturally improve." by Rick McCormick with F&I and Showroom logo and picture of Rick McCormick
F&IMay 1, 2026

F&I Training Fundamentals

How can auto dealerships help F&I managers fulfill their vital role in the most effective ways? Industry expert Rick McCormick shares his insights on the best ways to train these professionals and help them maintain good habits.

Read More →
Photo of car tire and the tread mark it left in snow
F&Iby Hannah MitchellApril 29, 2026

Not Just Any Tire Will Do

More consumers and businesses are opting for all-season options for various reasons as safety, sustainability and convenience push practical change.

Read More →
Ad Loading...
Photo of robot holding a laptop
F&Iby Hannah MitchellApril 27, 2026

How AI Will Drive the Next Wave of Innovation in Finance & Insurance

It’s time to take the next digital step to free F&I managers to handle the most challenging aspects of customer meetings.

Read More →
Photo of notepad and pen next to computer keyboard on desktop
F&IApril 13, 2026

Control in Sales Is an Illusion

Some of it should be given to the customer, but that doesn’t mean the F&I office relinquishes the process. In fact, a different approach both builds trust and boosts sales.

Read More →
Photo of external keyboard on office deak next to window
F&IApril 7, 2026

The Limited Warranty Game

Bringing it in-house benefits the dealership and its customers.

Read More →
Ad Loading...
Woman in casual clothing sitting at a desk
F&Iby Rick McCormickMarch 31, 2026

Curb The Confusion

Talk to F&I customers like you’d talk to a friend, without industry lingo or sales-like questions, and use hard proof to show, not tell, them about a need.

Read More →