• Apr 29, 2009
In a special broadcast to dealers yesterday, General Motors' sales chief, Mark LaNeve, explained that the automaker would buy back unsold new vehicles and parts from dealerships slated to be phased out by the end of 2010, but GM wouldn't pay off dealers for their franchises.

As reported earlier this week, GM plans to cut it U.S. dealerships by 42% by the end of next year, reducing the total number of retailers from 6,246 to 3,605. Beginning this May, GM will begin sending letters to around 1,200 dealers informing them that their franchises will not be renewed and "they will not be part of a reinvented GM going forward."

According to LaNeve, the 1,200 or so dealerships slated to be cut are "very poor performing and not adhering to the sales and service agreement obligations." Joining the underperformers will be an additional 500 dealerships in saturated urban markets, another 500 that will be shuttered by the end of the year due to normal attrition, yet another 500 retailers that carry Hummer, Saab and Saturn vehicles – brands which GM is desperately trying to unload – along with 35 stand-alone Pontiac dealers that will meet their demise when the brand is phased-out at the end of 2010.

How this is all going to sit with dealer franchise laws remains to be seen, but after watching the Oldsmobile debacle play out, we doubt any resolution between GM and its dealers will be easy.

[Source: Automotive News – Sub. Req. | Source Image: Justin Sullivan/Getty]


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    • 1 Second Ago
  • 26 Comments
      • 5 Years Ago
      I'm not sure how everyone keeps saying that the same lawsuits that were spurred with Oldsmobile's closing will be the same thing that happens with the closing of Pontiac. GM was probably losing money back in late 2000 when they made that announcement, but they were in much better shape financially than they are now.

      Assuming the dealers have an open & shut case, do any of them really think they'll be compensated legally considering GM's teetering status? I'd take the buybacks and move on.
      • 5 Years Ago
      Good luck getting any money from a bankrupt company run by the government.............GM has been screwing dealers and others for many years this is nothing new................Laneve even looks like a criminal........................
      • 5 Years Ago
      Because parts and service is what keeps most dealers running when sales are down. In fact, most dealers look at new cars as loss leaders. Used cars and parts and service is where the profit is. They don't want to take that profit center away (or create too much competition) from the dealers selling new cars.
        • 5 Years Ago
        They could do that, but they can't do warranty work on a new car without carrying the new car franchise. That would take away a big chunk of their business. Plus a lot of people who get good service from a dealer during their warranty period continue to take it there even after the warranty is up. That's what keeps a lot of new car dealers going.
      • 5 Years Ago
      The article says:
      "According to LaNeve, the 1,200 or so dealerships slated to be cut are "very poor performing and not adhering to the sales and service agreement obligations." "

      If those dealerships were already known to perform poorly and didn't adhere to agreement obligations, why haven't they been closed earlier?
      • 5 Years Ago
      Will the public know which dealerships will be getting the axe? Used shop parts at a nice price sound like they could be right around the corner.
        • 5 Years Ago
        I have my doubts that GM built the air compressors that the shop used.
        • 5 Years Ago
        @ SeaUrchin: I agree with Luigian. All of you who hated the auto bailouts--as the man said, go get your moneys worth. There's still going to be discounting to be had on Chevys, GMCs, and of course, Pontiacs and Saturns.

        Do what you can for your country!

        /only half sarcastically

        • 5 Years Ago
        "Used shop parts at a nice price sound like they could be right around the corner. "---You still planning to buy anything associated with GM?
      • 5 Years Ago
      Why not change these dealerships into Service Centers for GM, Toyota has less dealerships but sells a ton of cars, try getting service done when you need it with them. Honda has Service Center seperate from dealership locations. Its easier to get work done without having to go back to the dealership( being chase around by salemen)
      • 5 Years Ago
      Maybe because GM didn't want to be the bad guy and come in and risk getting into leagal battles by shutting the mdown before? Now they have no choice.
      • 5 Years Ago
      A friend owns a Chevy store in a depressed area. He was waiting to get bought out. He can hardly pay the rent on his GM signage. If he gets nothing for the building, he's personally bankrupt, too. The VW dealer next door left for greener pastures a couple years ago. The motel on the other side is closed. The discount store a few doors away has been torn down. The race track across the street is a wreck and will be closing. He's been pouring his personal reserve into the business and of course had lots of GM stock, now worth nothing. When he goes, he takes all his employees with him down the drain, cheats his poor municipality of all kinds of taxes, and cuts off the charities he's been supporting. Bad, bad, bad.
        • 5 Years Ago
        You mean to say the auto industry in general and GM and Chrysler in particular being in trouble is a bad thing, which is causing a lot of people at all levels, some of which have little directly to do the that auto industry, to lose a lot of money?

        No kidding.
        • 5 Years Ago
        Thank you NAFTA!
        • 5 Years Ago
        Just trying to personalize this situation. In '71, when the first $10k Chevy hit his lot, my friend started to look at imports. He never did anything. Now he's probably screwed. BTW, I drive an import: A Mazda6 wagon, made in Flat Rock MI by the UAW, with Cleveland engine and Lima OH transmission, and lots of other locally made parts. The same basic vehicle with Ford, Mercury and Lincoln nameplates, such as Fusion and Milan, is made in Mexico. Which are the imports, which are domestic?
      • 5 Years Ago
      Hey, that is a pic of the closed GM dealership in Colma, Ca near where I live. My frined use to work there too. :(
      race1foru
      • 5 Years Ago
      This will not fly. You cannot simply tell them their franchise agreement will not be renewed because this is another form of termination- which must be done on a mutual basis between the franchisee and the manufacturer. What you have printed above would be in direct violation of franchise law.

      I watched the IDL broadcast yesterday and nowhere in the broadcast did LaNeve ever say that dealers will not be paid for their franchises. He said they would be preparing "packages" for the dealers GM does not want going forward, but they "cannot terminate" the dealers.
        • 5 Years Ago
        @race1foru
        But what if those dealers floor with GM/GMAC and they suddenly get denied floorplan? OR what if they simply don't get sent any more parts or vehicles? Im sure somewhere in the franchise rules the amount of sales you make or your CSI are stipulations for you continuing to be eligbile as a franchise.
        • 5 Years Ago
        @race1foru
        If a dealer principal can prove that his dealership is a profitable entity (thru fixed operations, used car sales, etc.), he'd have a valid argument in a wrongful termination suit. GM must have a plan to buy out the brick and mortar from these guys.
        • 5 Years Ago
        @race1foru
        I also watched the IDL yesterday and he most definitely did not say that.
      • 5 Years Ago
      That sounds fair. I am guessing a Pontiac franchise currently has a market value of $0 or less. Why would GM pay for something that has no market value?
        • 5 Years Ago
        Because GM Caused the market value to be Zero.

        There are franchise holders with their livelyhoods on the line, and a lot of investment that was TANKED on one press release from GM.

        GM can't just back out of a Franchise agreement with no liability, no more than a Franchise holder can abuse the brand that belongs to GM. It is supposed to be a two way street.

        Otherwise why should ANYONE, EVER sell a GM product? If GM can just rescind it's branding, products, parts, and everything, at any given time? there has to be some measure of good faith.
      • 5 Years Ago
      Kind of makes you wonder, if GM knew that there were 1200 poorly performing ,sub par, dealers, why did they not take any actions before this ?
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