• Jan 26th 2009 at 2:43PM
  • 24
Dealership rationalization was something General Motors was looking at well before the economy went pear-shaped. GM still has more than 6,300 dealerships in the U.S., and it is even more important now to start shedding some of that financial burden. That is why The General told dealers at the NADA conference that it plans to get rid of 1,600 dealerships by 2012.

GM's initial viability plan to Congress proposed an eventual reduction to 4,000 dealerships. No one knows yet, though, how GM plans to do that. GM said it will explain the dealer elimination plan in the follow-up viability plan it submits to Congress on February 17. Said one GM dealer, "They basically said, 'We're looking for strong dealers, and if you're not a strong dealer, you better evaluate your options."

GM did say that 400 dealers per year being shut isn't a firm number, simply a target. Nevertheless, dealers are none too happy. Some dealers say GM is using GMAC to force dealers out by setting capital requirements beyond a dealer's reach. GM says it has no intention of using GMAC in such a way. When the time comes, dealership liquidation will be be judged market by market, and based on a number of factors including age, location, volume, capitalization and customer satisfaction. While the plan will obviously save GM money in the long term and make it more efficient, in the short term it is going to cost GM a fortune to close 1,600 locations.

[Source: Automotive News, sub req'd, Photo by Justin Sullivan/Getty]

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    • 1 Second Ago
      • 6 Years Ago
      I can't see how GM can pull the die on the vine stuff with the dealers they want to keep, so they're going to have to discriminate between the dealers they like and the ones they want to kill off. Smells like the makings of a lawsuit.
      • 6 Years Ago
      This is evident close to home here in Georgia-The Saturn dealership
      is closed and lights are out before Christmas and the GMC dealership 1/2 mile down
      from it, is liquidating it's remaining inventory to close their doors in the next
      30-45 days.
      • 6 Years Ago
      They're not moving fast enough. The Ford dealership in nearby Demopolis, Alabama closed down last month, and the Lincoln Mercury dealer in Tuscaloosa, Alabama mentioned last week that he was dropping his franchise immediately to concentrate on Volvo. In fact, a lot of the Ford dealers are closing down around here, while only one GM dealer-in Montgomery- has shut its doors. And all the Chrysler shops are still open.

      Across the line in Meridian, Mississippi, the Mitsubishi-Hyundai dealer closed down without a noise. I can understand Mitsubishi, but Hyundai was the big surprise-they were just as popular as Ford and Chevy. Hyundai owners in Meridian are not happy.
        • 6 Years Ago
        @ imoore: Tiny towns like Demopolis can probably get by without a new car dealer, those towns can get new product from Meridian or Selma. Conecuh County (near my neck of Alabama) has no new car dealers, but Evergreen has one pre-owned lot owned & operated by a multi-branded dealer in Andalusia in nearby Covington County. You could see a lot more arrangements like that pop up.

        The main downside I see is that while people hate dealing with the dealer service department, some of the indy shops aren't much better--some of them are much worse.
      • 6 Years Ago
      400 should be locked in. That is an attainable number each year.

      Also it shouldn't stop in 2012. They should continue until they have 4000 dealers or less.

      With a streamlined 5 brands even that is a bit much.
        • 6 Years Ago
        @ firstplace:

        On the contrary, those private dealers have contracts with GM to sell their vehciles. GM can't just end that contract whenever they choose. That's why it's called a contract.

        So, GM will instead likely be buying out those dealers in order to end the contracts early. So, yeah, it will cost them a lot of money.

        I believe they paid out some $2Billion to Oldsmobile dealers when Olds was shut down.
        • 6 Years Ago
        GM dosent own the dealers, they are almost all (99%) private or corporations not affiliated with GM other then the name. It wont cost them anything.
        • 6 Years Ago
        Also note that Saturn has 425 dealers so...there is a years worth right there.

        (If they let it die on the vine in 2012 like was said earlier today)
      • 6 Years Ago
      Please GM just combine Pontiac and Saturn and keep their best vehicles and rename the brand.. Opel. Trust me you'll earn a lot of money back and have fewers headaches as well as keep the remainder dealers happy.
      • 6 Years Ago
      While State Franchise Laws would preclude GM from wholesale closings of dealerships without (expensive) compensation, the current economic cycle and survival of the fittest will take care of that.

      With annual auto sales dipping to near 10 million annual units, unemployment higher and overall less sales of new and used autos, many dealers will close due to lack of access to capital or huge accumulated losses.

      Eventually the remaining dealers will pick up the balance of the business leaving fewer but stronger dealerships. The question is what happens to a dealer's franchise rights if he decides to close the location. Does he keep the franchise to open at a future time? Is it forefeited the moment he closes shop?
      • 6 Years Ago
      I know this is a dumb question, by why does car companies allow dealerships to own other dealerships that are of competing companies? To me, If I were GM, I'd shut down all those who own competing dealerships...
        • 6 Years Ago
        Same reason that your local grocery store sells Coca Cola beside Pepsi and Kelloggs cereal by Post products or Quaker Oats. It's called free enterprise and competition is good for business.
        • 6 Years Ago
        Actually, there are several reasons. Some involving federal and state monopoly and restraint of trade laws and others that make prudent business sense. Every automaker, not just GM, needs it's dealers to be as financially sound as possible. That way, they have the capital to improve their facilities, carry greater inventory and offer greater incentives. If that means carrying competitive brands to get there, sobeit. For example, maybe a megadealer has GM, BMW and Toyota stores. Two of the three may be doing very well and allow that dealer to stay in business. If they were GM only, they might fail and lose that market to Ford or Chrysler (OK, Chrysler's a bad example).
      • 6 Years Ago
      holy crap, how many GM dealers are there?
        • 6 Years Ago
        At the start of 2008, GM's U.S. dealership count was 6,653. But there are also over 14,000 individual franchises to contend with as well.

        Ideally GM should restructure into a single network of about 3000 dealers. That would give each dealer a community of 100,000 potential customers.

        Each dealer needs to sell about 1000 vehicles annually to be successful. So, if GM is planning 12 manufacturing facilities producing about 300,000 vehicles each; that would net 3,600,000 vehicles for sale annually which would be far more efficient than the current business model.

        However, realistically GM will likely have to settle for 2 divisions
        Cadillac-Chevrolet-Saturn and
        in order for true economies of scale to be effective. The more divsions it has, the harder it will be to control costs.
        • 6 Years Ago
        The exact same thought crossed my mind.
        • 6 Years Ago
        "GM still has more than 6,300 dealerships in the U.S., "

        Reading not one of your strong suits?

        "in the short term it is going to cost GM a fortune to close 1,600 locations."

        GM or the US taxpayer???
      • 6 Years Ago
      Can anyone explain to me why GM cares how many dealerships there are?

      GM doesn't own them (by law they cannot), so why do they care if there are more out there than there need to be?
      • 6 Years Ago
      Well, I've always been a GM man. However, that dealership there, in the picture is HORRIBLE. It's just north of me, and when i was a parts guy for a different dealership I got all of my stuff from a dealer 20 miles away as opposed to these guys who were 2 blocks down the very same street of my former employer. Not that I expect it in the slightest, but perhaps this will weed out the outfits replete with morons & horrible customer service. If those with non-shiesty dealings and high customer-retention see benefit from this, I'm all for it.

      I know that is not how it will work, but a man can dream.
      • 6 Years Ago
      Proof the world will end come 2012
      • 6 Years Ago
      pardon my ignorance, but i'm not clearly seeing why it would cost GM to close dealerships. anyone? and for that matter why not just axe the 400 bottom performers every year? 100 dealers per quarter, thats waht i call dealer incentive!
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