BREAKING: GM reportedly set to confirms it will pink-slip 1,100 dealers [*UPDATED]
by Chris Paukert on May 15th 2009 at 9:57AM 
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]
PRESS RELEASE:
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."
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Reader Comments (Page 1 of 2)
mike 10:04AM (5/15/2009)
Change Chrysler to GM, add 300 dealers and it looks like the the same as yesterday.
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Haydocy 10:05AM (5/15/2009)
Folks,
Here is an example of the absolute absurdity of task force dealer termination-
On one side of the street:
Ø We have the task force working on behalf of the US Government- please keep in mind the US government has a 2.9 trillion dollar debt this year-
Ø We have an auto manufacturer that is bankrupt
Ø We have a bankruptcy judge who focus is to have a foreign company (Fiat) take over Chrysler
On the other side
Ø We have thousands of small business folks across the USA, who has all their employees’ welfare and all their personal assets (life work) at stake
Ø These small business have somehow navigated the last 24 month economic auto depression-
Ø They are frontline in client sales and service keeping jobs and paying taxes
Ø They are the ones being targeted for not living up to the task force, manufacturer or Judges standards- instead of being publicly flogged and left destitute they should congratulated for helping keep Main Street (Not Wall Street alive). They do not have the luxury of being 2.9 trillion in debt!
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BigWill 3:21PM (5/15/2009)
"Would it really make any difference for service/warranty work whether the dealer you bought your car from closed?"
If I lived in a rural area and the dealer that's 10 minutes away from me closed and the next nearest dealer is an hour away then, yeah, it'd make a big difference/
MTigerV 10:12AM (5/15/2009)
Any chance we get a list with this one?
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dukeisduke 10:34AM (5/15/2009)
Nope, they're saying they're not going to release the list to the public. It will be up to the dealers to announce whether they're on the list.
/sucks
ZaphodBx 10:42AM (5/15/2009)
I can sort of understand not wanting to reveal this list, since the dealers have until late next year to shut down, and being on the list would keep people away from those dealerships. Still, from a larger perspective I think they'll be hurting the company as a whole by doing so.
I'm in the market to get a car this year, but I'd prefer to buy it from a dealer that's going to stick around, rather than being transferred to some other dealership down the road. If I can't be sure of that with GM, maybe it's time to look elsewhere.
dukeisduke 10:45AM (5/15/2009)
That makes sense. What dealer would want to be known as one of "the rejected"?
Judy Zik 1:28PM (5/15/2009)
Not releasing the list is another example of GM putting the customer last. If I was buying a GM vehicle I would be asking my dealership if they are closing. The odds are pretty good that most of these dealers will lie and say no or that they don't know until it becomes obvious by the half empty lot. GM will back up that lie by not releasing the list. Customers will go back for servicing and discover their GM dealership lied.
What this bizzare scheme does say to me is that GM management is serious about trying to avoid bankruptcy since it would have been much easier to do this under bankruptcy. That would lead one to speculate that they don't like Chrysler's chances of bouncing back from it.
Nightcrawler 3:14PM (5/15/2009)
Would it really make any difference for service/warranty work whether the dealer you bought your car from closed? I'm not sure that it would. When you bring you car in for warranty service, would the dealer treat a driver that bought his car at another, since closed, dealership any different than they would treat someone who bought the car there?
In both cases, the big reason to treat them right is to get them to continue getting the drivers to service and buy their cars at that dealer. That rationale would be just as true whether you are current customer or a conquest customer from a failed dealer nearby.
inteller 3:28PM (5/15/2009)
Ah I see, so they are going to leave it up to the dealers to lie to their customers when they ask the question "will you be around a year from now"
Real classy GM...but then again I would expect nothing less from you.
UltimoDragon 11:53PM (5/15/2009)
@ ZaphodBX, who wrote: I can sort of understand not wanting to reveal this list, since the dealers have until late next year to shut down, and being on the list would keep people away from those dealerships. Still, from a larger perspective I think they'll be hurting the company as a whole by doing so.
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IF it allows the rejected dealerships to rebound as used car outlets or to get a new brand (Toyota is quietly approaching some of the jilted Chrysler dealers, apparently), that could be enough to stave off any lawsuits.
Remember, these dealers aren't actually being 'shut down', they're just having the rights to sell new cars taken away. With the superior financing connections they probably still have (without GMAC), there's nothing stopping them from becoming a bigger and better used car outlet--perhaps buying out smaller lots and backing them up with dealer warranties and hyping a 'dealer quality' service department.
Grady Automotive and Hamp Griffin Motors in Mobile were longtime outlets for Buick, Volvo and Honda but lost them to other sellers. Instead of closing, they simply stepped up their used car business and are thriving that way.
Aloysius Vampa 10:13AM (5/15/2009)
That's... a lot of dealers.
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Jerry 10:14AM (5/15/2009)
How is General Motors going to transfer 120,000 (08 & 09) vehicles to existing dealerships? Why would other dealers want to add this liability to their existing floorplan. GM would have to give them away with free transport.
I do however feel for the Owner's who worked hard to build their business through the years and all the families effected.
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Joe K. 10:42AM (5/15/2009)
They are listing many of them in their PEP2 program for employees. Others get redistributed through the system. So since the factories aren't producing, these cars will be sent to dealers to fill allocations.
BigTeebo 12:13PM (5/15/2009)
You can drive the vehicles from one dealership to another.
danotoriousb 10:14AM (5/15/2009)
Kinda crazy that we have that many dealers to begin with, then again, most dealerships only sell certain GM products, and not all. I know recently in my city there was a "war" to get the right to sell Hummer between two Chevy dealers.
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dukeisduke 10:55AM (5/15/2009)
When GM had 50% of market share, it made sense. They've had as many as 6,050 dealers. Even with that, they were pretty good at keeping dealers of a given brand spaced x number of miles apart. One example where they didn't was Henry Butts Olds here in Dallas. Originally located on the Dallas North Tollway in north Dallas, they were one of the largest Olds dealers in the country (this was when the Cutlass was the top selling American car). Then they moved to a huge new facility in Plano.
Then, GM granted another franchise in Plano, Heritage Olds, which started stealing sales from HBO. This eventually forced HBO into bankruptcy. As for Heritage Olds, they got in trouble with the state of Texas, for not sending in registration fees (it became public knowledge when buyers started complaining that weren't given license plates, only one cardboard tag after another). So, Plano lost both Olds dealers, as Heritage was taken over by GMAC.
Alex 10:16AM (5/15/2009)
I get the feeling that this won't end quietly. Its a little easier for Chrysler because they are under the protection of Ch 11. For GM, this will be more akin to Oldsmobile.
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Todd 10:16AM (5/15/2009)
[GM] expects an "orderly wind-down of the affected dealers over the next year or so,"
That's B.S. The electricity bills alone won't allow for that. A dealership cannot stay open for a year knowing there is no "tomorrow" to push lagging sales onto. If I were a dealer I'd closed the doors today and cut my losses. Why stay open? What benefit is there is perpetuating the lie that GM will still be in business next year?
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Kumar 2:49PM (5/15/2009)
Well, I imagine GM arbitrarily put this a year out to make it seem like they aren't declaring bankruptcy in two weeks. This is possibly a ploy to go for more tax-payer ca$h, with GM trying to persuade the feds that it's better to just deal with one massive auto bankruptcy at a time.
Something tells me we'll hear the GM cite a lack of dealerships agreeing to close as a reason for filing for BK if and when the do....