According to Bloomberg News, General Motors is set to send some 1,100 notices today to U.S. dealers detailing the manufacturer's plans to sever their relationship. The move comes on the heels of yesterday's news detailing fellow beleaguered automaker Chrysler's announcement that they are firing some 25% of their own network (some 789 showrooms).
If the news agency's sources are accurate, those 1,200 dealers have possession of about 120,000 vehicles, or roughly $2.5 billion in unsold inventory. The deep dealer cut is not expected to be the last by GM, who has designs on chopping its dealer network to 3,600 stores (representing a 42% cut) by the end of 2010.
Unlike Chrysler, which is looking to lose its disenfranchised dealers by June 9 (as part of its Chapter 11 bankruptcy proceedings), Bloomberg's source says it expects an "orderly wind-down of the affected dealers over the next year or so," which essentially means that the dealers will close when their inventories are sold-through. In contrast, Chrysler has already said it is under no obligation to reimburse its closing dealers for vehicle, parts, or tooling, though it will try to pair up affected dealers with those that are staying on in an effort to transfer inventory.
*UPDATE: GM has confirmed that it will seek to sever relations with 1,100 dealers, characterizing the affected dealers as "underperforming and very small sales volume" stores. The official word is that GM will not be terminating any dealerships today, but that they will be discussing their plans with dealers over the next few weeks. Official press release has been added after the jump.
[Source: Bloomberg | Image: Scott Olson/Getty]
GM Statement Regarding Dealer Network Communications
In conjunction with conversations General Motors started with its U.S. dealers today, GM issued the following statement:
As noted in our recent S-4 filing and updated Viability Plan, General Motors plans to reduce its dealer network from 5,969 stores today to approximately 3,600 by the end of 2010.
This process starts today, as GM begins contacting dealers regarding its long term planning. Approximately 1,100 underperforming and very small sales volume U.S. dealers will be advised that GM does not see them as part of its dealer network on a long-term basis. In most cases, existing franchise agreements run through October of 2010.
In addition, we will be updating about 470 Saturn, HUMMER and Saab dealers on the status of those brands and we will be discussing how the remaining dealers will support our retail plans going forward. While additional cuts will be made, we believe the vast majority, over 90 percent, of the remaining dealers will be offered a chance to remain with GM. However, specific dealer issues, further attrition and additional possible dealer network actions are expected to bring the number of future GM dealers to around 3,600 by the end of 2010, as described in the Plan. The actual number could vary given levels of attrition, etc. outside of GM's control.
"We have said from the beginning that our dealers are not a problem but an asset for General Motors," said Mark LaNeve, GM Vice President of Sales Service and Marketing. "However it is imperative that a healthy, viable GM have a healthy, viable dealer body that can not only survive but prosper during cyclical downturns. It is obvious that almost all parts of GM, including the dealer body, must get smaller and more efficient."
"In response, we are letting them know about our long term plans. GM's viability plan calls for fewer, stronger brands as well as fewer, stronger dealers. We have taken a very difficult step by identifying those dealerships we'd like to keep in the GM dealer network and those with whom we will have to wind down our business relationships," LaNeve said.
As independently owned businesses, dealer owners will make their own decisions if and when they want to make this information public. GM is not releasing the names of any dealers.
"We are not terminating any dealerships today," LaNeve clarified, "We will be talking to all of our dealers over the next few weeks, letting them know now in the spirit of open communication, so they are advised well in advance, about our long-term plans and their role in them. Long term, GM should have fewer, healthier dealers, maintaining GM's current high customer satisfaction ratings, with more sales per outlet."