The Treasury Department neglected to consider the potential job losses and economic impact when it pushed General Motors and Chrysler LLC to step up plans to close dealerships as part of their government-funded restructurings, a federal watchdog said.

A report by the Special Inspector General for the Troubled Asset Relief Program that handled the federal bailouts said the Obama administration’s auto industry task force wasn’t focusing on the savings for the automakers either when it pushed them to shut dealerships faster, reported The Detroit News.

“The fact that Treasury was acting in part as an investor in GM and Chrysler does not insulate Treasury from its responsibility to the broader economy,” said the audit by Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, the $787 billion stimulus program known as TARP.

“Job losses at terminated dealerships were apparently not a substantial factor in the Auto Team’s consideration of the dealership termination issue,” it said.

The Auto Team is part of the Treasury Department, which objected strongly to the report and denied pushing GM and Chrysler to single out dealerships in March of 2009 when it asked them to revise their restructuring plans.

In a letter attached to the inspector’s report, a senior Treasury official said the restructurings required “deep and painful sacrifices” from all stakeholders.

“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.

Administration officials said it was easy in hindsight to question whether things could have been done differently. The report “takes the situation dramatically out of context,” one administration official said.

Two of Detroit’s three automakers were on the verge of extinction, the official said. “Over a million jobs were saved by virtue of saving GM and Chrysler.”

While the report focused on job losses at dealerships, more were lost in other parts of the industry, another administration official said. Since June 2007, the number of jobs in auto manufacturing has fallen 30 percent, compared with an 18 percent drop in auto retailing jobs.

In March of 2009, after the Auto Team rejected the restructuring plans submitted by GM and Chrysler along with requests for aid, the companies revised their plans. Chrysler said it would terminate 789 dealerships by June 10, 2009, and GM announced plans to close 1,454 dealerships by October 2010.

The terminations remain an issue, with some dealers still appealing the decisions while automakers find they need some of the stores.

The report also stoked political differences over the government’s role. “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, R-Calif., ranking member of the House Committee on Oversight and Government Reform.

GM said that it was showing “substantial progress” a year later. “The events depicted in the report have since been overtaken by a new GM and a stronger dealer network to match,” it said.

DETROIT – General Motors and Chrysler will reconsider decisions to close thousands of dealerships as part of a compromise meant to stave off federal legislation that would require them to keep showrooms open, the Associated Press reported.

The decision by the two automakers raises the prospect of new life for some of the more than 3,000 dealerships that were slated to close. The shutdowns are part of a broad industry restructuring.

The plans call for face-to-face reviews with dealerships and offer binding arbitration with those who face closure of their showrooms. The largest U.S. automaker also said it would be more transparent about how it picked the dealers that will close. It will also speed up payments to assist those targeted for shutdown.

As part of its deep restructuring this year, GM has said it will cut 2,400 dealers from its 6,000-dealer network by next fall. Chrysler announced similar plans, slashing 789 dealers as part of its bankruptcy proceedings this summer. Both automakers say the cuts are needed to better align their dealer network with much lower demand for cars and trucks.

But dealers accused the automakers of closing lots that were still profitable, and said the auto companies weren’t forthcoming about the criteria they used to decide who will close and who stay open.

The House passed legislation in July that would force the companies to reverse their closure plans, though the Senate has not taken it up. The Obama administration opposes the measure.

Lawmakers have warned that if an agreement isn’t reached, legislation would move forward to deal with the closures. Most of the Senate Commerce Committee wrote a letter two weeks ago to Chrysler and GM seeking more information about the talks and warning that dealers should be treated fairly.

DETROIT – GM is announcing that it is prepared to implement a plan that both resolves concerns raised by dealers regarding GM’s dealer network restructuring activities and allows it to continue to move forward with a critical component of its long-term viability plan.

GM will begin to implement this plan in mid-January provided that legislation related to GM’s dealer restructuring does not move forward. GM says its plan, the result of several months of discussion and constructive engagement among dealer groups and members of Congress, provides complete transparency, face-to-face reviews and binding arbitration, which together, will likely result in some dealers being reinstated.

GM’s plan includes:

• A commitment to advise all Chevrolet, Buick, GMC and Cadillac dealerships that received a complete wind-down agreement of the criteria used by GM in the selection of that dealership for wind-down. >/li>
• A face-to-face review process for all complete wind-down dealers who have not already terminated their dealer sales and service agreements with GM.
• If the complete wind-down dealer is not satisfied with the outcome of the face-to-face review process, he or she may elect to proceed to binding arbitration. The arbitration will expressly be limited to whether GM selected the dealer to receive the wind-down agreement on the basis of its business criteria.
• Accelerated wind-down payments to dealers consistent with the terms of their wind-down agreements.
• A process to resolve open issues identified by dealers related to the operation of wind-down dealers.
• Agreement to support public policy issues of mutual interest identified by dealers.
• Agreement to work with appropriate policy makers regarding floor-plan and other financing issues that are important to dealers.
• Additional evaluation in limited circumstances for complete wind-down dealers who purchased stock, land or dealerships from GM in the last four years.
• Reaffirmation of GM’s long-standing commitment to try to increase the diversity of its dealer body.
• In the limited circumstances where there are dealer re-establishments, area wind-down dealers will be given the opportunity to submit a proposal.
• Market reevaluation to ensure GM has sufficient dealer representation across the country.
• Placement assistance for service technicians and other dealership employees.