UPDATE:GM, Chrysler Executives Back In Congress To Defend Dealer Cuts

Top executives at General Motors Corp. (GMGMQ) and Chrysler LLC appeared in Congress for the second time in two weeks Friday to defend plans to cut dealers from their retail networks, dismissing criticism from lawmakers that they have treated the dealers unfairly.

"A strong dealer body is vital to GM's success," GM Chief Executive Frederick "Fritz" Henderson said in prepared remarks before the House Energy and Commerce Committee's subcommittee on oversight and investigations.

He said the planned closing of nearly 2,600 dealerships by fall 2010 will save the company $2 billion annually.

Henderson said GM currently has 6,000 dealerships compared to 1,240 for Toyota Motor Corp. (TM). A large dealer network forces dealers of the same brands to compete against each other, he said, often forcing them to reduce prices on GM vehicles, eroding the cars' "residual" value.

Also scheduled to testify Friday were Chrysler LLC President James Press, John McEleney, chairman of the National Automobile Dealers Association, and individual dealers. Chrysler closed nearly 800 dealerships this month.

Lawmakers voiced skepticism of the rationale behind the dealer closings.

"I can think of few subjects that have brought the ire of so many members" of Congress as the dealer closings, said Rep. Bart Stupak, D-Mich., chairman of the subcommittee.

"How is it pro-customer to reduce competition?" asked Rep. Greg Walden, R-Ore.

Walden said that the planned closing of a GM dealership in Oregon will force residents to travel 136 miles to the nearest GM dealership for service.

-By Josh Mitchell, Dow Jones Newswires; 202-862-6637; [e-mail]