GM Looking for Orderly Wind Down of 1,100 Dealers
By Michelle Krebs May 15, 2009By Michelle Krebs
DETROIT -- General Motors notified 1,100 dealers Friday that their franchise agreements would not be renewed when they expire in October 2010, and GM will help them wind down in an orderly way.
GM, which has not filed bankruptcy but likely will, is taking a different route than Chrysler, which is now in bankruptcy. Chrysler immediately terminated 789 dealers on Thursday. Unless they pursue legal action, those Chrysler dealers will go out of business quickly and with no financial support from the automaker.
GM has chosen to wind down the 1,100 dealers over the next 18 months with its financial support. In addition to the 1,110 dealers, who were not revealed, the future of 500 Hummer, Saturn and Saab dealers has yet to be determined as well.
Mark LaNeve, GM North America vice president Vehicle Sales, Service and Marketing, said in a conference call with the media Friday that the 1,100 dealers were underperformers -- and knew they were -- based on routine measurements GM does to grade its dealers against their peers. Key criteria in those evaluations includes sales, customer satisfaction, profitability and working capital.
"In most cases, these [1,100] dealerships were hurting, losing money and in danger of going out of business anyway," LaNeve said.
Of the 1,100 dealers notified, as many as 400 to 500 sold a scant 35 GM vehicles a year, making them "not economically viable," at those sales levels, LaNeve said.
The 1,100 dealers represent 18 percent of GM dealers and accounted for only 7 percent of GM's sales in 2008. They hold 8 percent of on-ground inventory -- about 65,000 vehicles -- at the moment.
In early June, GM will follow-up with the 1,100 dealers notified Friday asking them if they want accept the automaker's help in winding down their business, which would include the sale of their vehicles and parts inventory with GM financial support.
Dealers can opt to take legal action against GM. However, most likely they would be thwarted if GM files for Chapter 11 bankruptcy as it is expected to around that time. Federal bankruptcy rules supercede state franchise laws, which would allow GM to handpick the dealers it wants to keep and wants to go. Dealers would be left to go out of business with no financial help.
An orderly wind down is better for GM financially as well. A dealer who finances vehicles through GMAC could simply choose to dump the remaining inventory on GM. That would mean GM would have to pay to take the vehicles back and then sell them through auction, a move that could depress prices and hurt resale values if the market became flooded with unsold inventory.
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At this point I'd almost love to see General Motors fold up and close the doors.......its bad enough they were building inferior vehicles....then shipped off jobs to Mexico and other places around the world, laying off us Americans who buy their products. Then ask for Billions of dollars from the taxpayers to keep em afloat just to turn around and say "were going to import more cars from China" What the hell is wrong with this company? and the American people if they continue to buy from GM.......
In recent years the quality of build, reliability, and performance of GM cars on the whole had nearly reached “viability”. But it’s been the dealerships that, in my mind, have done the most harm to the company.
Domestic dealerships just plain suck. They’ve made a buying experience slimy and dreadful. Their service departments define the term “oxymoron”. And the parts departments couldn’t care less about the customers. And they are so out of date. Losing a few thousand can only help.
If you think GM dealers are slimy and dreadful and their service departments define the term "oxymoron", perhaps you should try some of the Toyota dealers I've dealt with in the past.
The Pontiac dealers I've dealt with were always more than helpful, but I think that's because every time something broke, it was a thirty dollar part requiring 3 hours of labor.
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