House Majority Leader Steny Hoyer is one of those calling for the reinstatement of thousands of dealers "fired" by GM and Chrysler.

The Obama White House may soon be faced with a potentially no-win decision: whether to maintain its support of Chrysler and General Motors or give backing to those who contend the two automakers have unfairly issued death sentences to thousands of U.S. auto dealers.

Momentum is building on Capitol Hill, especially within the U.S. House of Representatives, to take action that would reinstate 789 Chrysler dealers who were summarily terminated as part of that maker’s recent bankruptcy.  A proposed bill gaining ground on the Hill would also force GM to cancel plans to trim thousands from its own retail body.

The larger maker, which could re-emerge from bankruptcy by week’s end, hopes to trim its dealer network to as little as 3,600 from 6,100 last year, but GM is giving retailers up to 16 months to wind down their operations.  So far, the maker says 98% of the dealers it is eliminating have signed contracts that will also provide financial assistance to ease the shut downs.

On Tuesday, the House Appropriations Committee approved an amendment to a measure that would force the two companies to rescind the cuts, and Capitol Hill observers suggest that such a bill could soon gain the numbers needed for passage.

A GM spokesman contended such a measure “would put at risk our long-term viability,” though Ohio Republican Steve LaTourette contended the House needed to “force Chrysler and GM to restore franchise agreements” that, he felt, were unfairly cut under the protection of the bankruptcy system.

The White House is hoping to head off a showdown, and while the president was in Italy, attending the G-8 meeting of global leaders, senior administration officials, including auto task force chief Steve Rattner, sat down with congressional leaders to search for a compromise.  Also on hand were top auto executives, including Troy Clarke, head of North American operations, and Chrysler Deputy-CEO Jim Press.

Following the 90-minute meeting, a spokesperson for House Majority Leader Steny Hoyer said the democratic congressman was hoping to achieve a “fair and transparent process,” though spokeswoman Katie Grant seemed to suggest there was room for compromise, noting the need “to give our nation’s auto companies their best chance to succeed.”

There are several proposals working their way through the House, including one co-sponsored by Hoyer and 201 other representatives.  Support for such measures appears strongest on the House side, reflecting the fact that representatives are more closely tied to events in their district – and, critics contend, to the fund-raising activities that traditionally draw significant dollars from auto dealers.

Though there are plenty of Senate members also angry about the vast dealer cutbacks, government-watchers say there is far less chance such action would clear the appropriate committees, never mind make it to the floor for a vote.  That would seem to assure that GM and Chrysler will get to move ahead with their retail restructuring plans.  But that ignores the political side of the matter, something the Obama Administration can’t afford to dismiss.  So, there very well could be some compromises made in the coming days.