Rock, meet hard place. With General Motors handed a directive from the White House to be ultra-aggressive in its restructuring in order to secure more government loans, the automaker is making cuts everywhere and dealers are far from immune. As reported previously, GM's plan to shrink its retailers from nearly 6,300 to 3,700 by the end of 2010 is going to be as painful as a Civil War amputation. Initially, General Motors will deny franchise renewal to dealerships that don't measure up on metrics such as customer satisfaction, profits, volume, and capitalization. An initial group of 1,200 stores will either have an uncomfortable meeting or get a "Dear John" letter starting this month.

Unsold cars will be bought back, but GM hasn't made any intimation that it's interested in compensating for special tools, parts inventory, real estate, and the "blue-sky" value of the outlet. The move to buy back only the unsold cars is likely to lead to legal action on the part of some dealers. The dealers are not only nervous, but they've often leveraged one dealership against their others in order to capitalize their operations. Closing one store that's part of a family of dealerships could start a domino effect for that franchisee, and state franchise laws protect the dealers far more than the automaker. Without filing for Chapter 11, General Motors faces a real fight in its action to pull franchises.

[Source: Automotive News - Sub. Req.]