ChefMark

I wonder how true this is:

GM pushes faster plan to cut U.S. dealers: sources

Thu Apr 16, 2009 12:11am ED
By Kevin Krolicki, David Bailey and Soyoung Kim

DETROIT (Reuters) - General Motors Corp has told U.S. dealers it is accelerating its timetable for closing about 1,700 dealerships as it rushes to meet a June 1 deadline to restructure under U.S. government oversight, people with knowledge of the discussions said.

In a series of meetings with key dealers including representatives of the National Automobile Dealers Association, GM executives also said about 200 dealerships had closed in the first quarter, according to people briefed on those talks.

The sources asked not to be named because of the sensitive nature of GM's discussions with its cash-strapped dealers.

Dealer representatives met on Tuesday in Detroit with GM Chief Executive Fritz Henderson and on Wednesday with GM sales chief Mark LaNeve, the sources said.

A GM spokesman confirmed that the meetings had taken place but declined to comment on the closed-door discussions.

Separately, Chrysler LLC executives, including sales chief Jim Press, held a conference call for dealers on Tuesday and met with key dealers on Wednesday, sources said.

"The message was that all the ***** are in the air, but they were committed to trying to reach a deal with Fiat," one Chrysler dealer who participated in the briefing said.

Chrysler could not be immediately reached for comment.

Both embattled automakers were meeting with dealers, with just weeks remaining to hammer out new concessionary deals with creditors and their major union under the threat of a government-sponsored bankruptcy.

Chrysler has until the end of April to conclude a deal with Italy's Fiat SpA and win other needed concessions. GM has been given until June 1 to attempt its own out-of-court restructuring by U.S. officials.

GM dealers who met with executives in Detroit this week were told that the automaker has several interested potential investors in its troubled Hummer SUV brand and expected to have an offer that would keep the brand running, one of the people familiar with the discussions said.

GM's Henderson had said in late March that a decision on Hummer could come within weeks. Henderson took over as CEO when the government ousted Rick Wagoner amid criticism he had moved too slowly on the automaker's restructuring.

HOT BUTTON ISSUE

The issue of how many U.S. dealerships GM can support has been one of the hot-button issues for U.S. officials as they drive GM toward a stepped-up restructuring that many observers have now concluded will include a bankruptcy filing.

GM ended 2008 with over 6,200 dealers in the United States and had presented a plan to the U.S. autos task force, run by former investment banker Steve Rattner, that would have cut that by about 25 percent to near 4,100 over the next five years as dealers shut down or merged.

The task force rejected GM's dealer consolidation plan as one element of a turnaround that officials said did not go far enough or move fast enough.

Since delivering that verdict on GM's plan late last month, the autos task force has told the automaker to go to work on an expedited dealer consolidation plan that would not rely on attrition alone, people briefed on those discussions said.

As a result, GM officials have told dealers that they would identify underperforming locations and could move to terminate franchise agreements by June 1, a dealer who had received such a notice said on Wednesday.

GM is counting on the spin-off or closure of its Saturn and Hummer brands -- combined with dealership closures because of declining business conditions and tight credit -- to deliver about half of its targeted cuts, according to the dealer.

For the remainder, GM is preparing to terminate franchise agreements without the kind of payouts that it made when it shut down its Oldsmobile division and closed some 2,800 dealerships. That process cost GM more than $1 billion.

Representatives of U.S. auto dealers, including the NADA trade group, have met at least four times with members of the U.S. autos task force since last month, including discussions of the financing pressure on both dealers and car shoppers, the sources said.

(Reporting by Kevin Krolicki, David Bailey and Soyoung Kim; Additional reporting by Poornima Gupta; Editing by Richard Chang)
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Corvette Action Center
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"Let your plans be dark and impenetrable as night, and when you move, fall like a thunderbolt." - Sun Tzu

glacierbay2

If the dealers are privately owned, how could GM force any closures? I understand that there are far too many dealers in the country, but who gets to pick and choose which ones should stay or go? Honda and BMW sell alot of cars, but seem to do so from far fewer dealerships; is this by design or accident? The times they are a changin-- sez the man.

shopdog

GM can put a dealer out of business by refusing to sell cars to them. Of course that seems a particularly stupid thing to do. But driving away business has been GM's avowed goal for some time now.

MN_Corvette

I don't understand the relationship between dealers and manufacturer. Especially, why is the gov't even involved? Why is this an issue affecting bailout/bankruptcy? It would seem to me that attrition of dealrs just closing for their own financial reasons wiould take care of things.

06 C6 vert

Where have you guys been on the moon?

yell01

There are way too many dealers. All they do is compete against one another and eventually pizz people off enough that they go to another brand.

MoVette!

I'd say this is very real...GM has been talking about seriously reducing the number of dealers for many years. I just wonder how they determine who to axe and who to keep?

Dave@Ciocca

Atlantic City is not a high population area, but there are 3 Chevy dealers within 10 miles, 6 within a half hour and around 15 within an hour.

Within that same hour, there are 3 Honda dealers, 2 BMW dealers and 2 Toyota dealers.

Which brand's dealers do you think make more money per car?

MoVette!

I would assume not the Chevy dealers.
I would have the same issue with this happening that I do with getting my Toyota serviced...closest dealer is 40 minutes away.

Closest Chevy dealer is 6 blocks away but I probably wouldn't let them touch it anyway. I would go the 40 miles to a larger, better equipped and trained GM dealership, which happens to be a Toyota dealer also!

GotVett?

Gonna be a tough new world!

ChefMark

How is GM going to decide who get the axe? I would think it would revolve around sales, size and location or size of the town.

TrenAman

each dealership has a score. they are put into catagories based on size and whatnot by GM. SImple thing to do, the best dealers stay, the worst are cut off. GM simply pulls the brand license "Chevy, Pontiac, Caddy, etcc." from the dealer and the dealer would no longer be able to purchase cars. I do believe when this happens the dealer gets compensated like 2million per license per contract revoked.

Silver05GTO

I'd guess the smaller dealers would get the axe over a larger one........specially if they are more Pontiac/saturn driven sales.

RRVettes

Whatever metrics GM uses to cut autrhorized dealer agreements, they will need to be consistent or they will risk legal challenges. But cut they must!! Over distribution of any product or service is a disaster.

Just look at Internet pricing and what that is doing to companies globally. Severe price pressures between competitors is a short-term benefit to consumers. Long-term, this has negative results as our favorite products vaporize from the market because the companies that made them can't make any money at it or go out of business. The other alternative is for companies to cut the costs for making our favorite products...like moving production out of the US or buying cheaper parts. Consumers need reasonable pricing and value, but companies need reasonable profit margins to stay in business and fund R&D. I really would like to see a C7 someday.

BSE1956

It is remarkable to me that more multi brand GM dealers do not already exist.
Cadillac/Chevy/GMC....or something similar.
Maybe not a Pontiac and Buick under the same roof. Does that make sense?
There's a Volvo dealer near me that has been in business for 40 years and also has Saab (chapter 11) and Buick...Seems kind of dopey.
I wish them luck. There's going to be a bunch more folks out of work now.

TCW

How about asking known long time customers? I for one would LOVE to see West Chevrolet in Maryville, Tennessee closed down.

Tom

Vasta

Not really. Thinning the herd will lead to higher profitability among the remaining dealerships leading to more long term stability.

A good analogy would be how many Starbucks do we really need on a per block basis?

danl72

I hope it helps with their restructuring.

zirkle

i want internet ordering like televisions. dealers in northern virginia are all bad.

hankg42

I would hope that the quality of the service department would enter into the equation as well as just sales.