GM pulls the plug on 1,124 under-performing dealerships
Posted on May 15, 2009 by Zane Merva in Business
General Motors sent franchise termination letters to 1,124 of it’s dealers this morning in the first move of a plan to pare the automaker’s dealer network of 5,969 dealerships down to 3,600.
Aside from the dealers notified this morning, GM plans to close or cut loose 470 Saturn, Saab, and Hummer outlets and another 35 Pontiac specific outlets.
According to GM, the notified dealers only account for 7-percent of the company’s 2008 sales unit total and hold 8-percent (65,000 vehicles) of GM’s current unsold inventory.
Dealer’s who are affected may appeal the decision to terminate their agreements, however Mark LeNeve, North American sales vice-president is quoted by Automotive News as saying “”We don’t anticipate that there’ll be much reversing of these decisions,” LaNeve said. “If they have issues that should be brought to our attention, there is a Web site that they can submit that to. We may have made a mistake, and we may have had bad data.”
Unlike Chrysler who terminated 789 dealers yesterday, GM will not release a list of the affected dealerships.
GM Statement on dealership terminations
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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