📰 Auto News GM to close 2,600 Dealerships

[Half Ass Magic]

http://mystateline.com/content/fulltext/?cid=62421

(Detroit, MI) -- General Motors has ambitious plans to shut down more than 26-hundred of its 62-hundred dealerships -- 42 percent of them -- by the end of next year.

It's part of GM's overall restructuring plan the automaker hopes will be accepted by the White House Automotive Task Force.

The proposal leaves many dealers scratching their heads because GM doesn't own the dealerships.

Most operate under franchises granted by GM.

The dealers say the money flows to GM, not the other way around, so the automaker won't save anything by eliminating dealerships.



During the first three months of the year, about 200 GM dealers went out of business due to the slide in auto sales.

GM sales were off nearly 50 percent during the first quarter.

CEO Fritz Henderson says the company will notify dealers in May and make offers to terminate franchise agreements.




-Will

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[02BlueGT]

The only way this makes sense, is it will quell a lot of the dealership pricing issues, and such that arise from having two of the same kind of car dealership in a square mile....... but this move will actually cost GM money.....I don't see why they don't just wait for the franchise agreements/contracts to expire(they are not indefinite, and probably need to be renewed every year or every few years) and only renew the ones they want, it woudn't cost them anything, as renewal isn't guaranteed.......


Just my .02

 

[Half Ass Magic]

Well technically a 1,000 or so of the closures will be Saturn, Hummer, and a couple Pontiac only dealers....Since they are axing all of those Makes.

-Will

 

[02BlueGT]

Well technically a 1,000 or so of the closures will be Saturn, Hummer, and a couple Pontiac only dealers....Since they are axing all of those Makes.

-Will

yes, but they have to pay huge fees and fines to break the franchise agreements/contracts, even if they are killing the company.... look at olds, it cost hundreds of millions if not over a billion to kill that brand

 

[KnightFan26917]

and a couple Pontiac only dealers....

One of those is in this area. Saw it on the news the other night, though I can't remember right now what the dealership name is.

Somehow, I was under the impression that the dealership had to have Pontiac/Buick/GMC all under the same roof, but I guess not.

*shrugs*



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[bluzohh6]

So how can GM just close the dealerships? Its not like they are owned by them are they? Don't private people own the dealerships? Are the owners getting bought out?

 

[02BlueGT]

Are the owners getting bought out?

They bought out a few locally already, so I assume that is the plan for most.... buying put dealerships doesn't seem like a way to increase profits

 

[Oreif]

So how can GM just close the dealerships? Its not like they are owned by them are they? Don't private people own the dealerships? Are the owners getting bought out?

After the Oldsmobile fiasco, GM changed the franchise contracts.
Some dealerships will get bought out by GM and some will get a franchise refund. The "refund" is so the dealership can keep the dealership (land, building, employees, etc.) and just change brands. When GM buys the dealership it is closed the land/building are sold at auction. Most dealership groups will take the "refund" and just move another brand into that location. O'Hare Pontiac chose to take the "refund" when GM started to combine Pontiac/Buick/GMC brands and they switched to Hyundai and Honda.

 

[Smoke]

After the Oldsmobile fiasco, GM changed the franchise contracts.
Some dealerships will get bought out by GM and some will get a franchise refund. The "refund" is so the dealership can keep the dealership (land, building, employees, etc.) and just change brands. When GM buys the dealership it is closed the land/building are sold at auction. Most dealership groups will take the "refund" and just move another brand into that location. O'Hare Pontiac chose to take the "refund" when GM started to combine Pontiac/Buick/GMC brands and they switched to Hyundai and Honda.

I worked next to a Pontiac dealer that took this way out and changed to selling Hondas ,since back when gas was $4.50 a gallon they were selling $60K GMC Denalis and $30K G6es.

In this economy some dealers are barely staying afloat.Most will take the easy out and either change brands or fold versus a long court battle with GM over a franchise contract.

 

[DanJ]

Still, even with changing brands there can only be so many Hyundai,Honda or Toyota dealerships.

 

[Mike K]

You can not arbitrarily force a franchisee out of business without just cause. Each state has franchise laws to prevent this. I can't see how they would get around this and because of that (and because the bondholders aren't going to exchange their bonds for common stock) I'm nearly certain this company is going to file for bankruptcy. It's what should have happened from the getgo and it would have prevented ole' Barak from having his hand in how the business is operated.

Imagine owning a dealership in a smaller town and just getting a letter from GM telling you you're no longer welcome to sell their product, use their likeness, etc. That ruins you.

It sucks because it should have never gotten to this point. The market should have never been this over-saturated with dealers...

 

[Yaj Yak]

I fucking agree compleeeeeeeeeeeetely.

not just over saturated with dealers, but over-saturated with vehicles...

had proper union steps been taken, and gm didnt have to pay someone money every day, and created such a surplus of vehicles, which created waaaay too much vehicle stock and dealers... we would be in good shape.

 

[The Broken Regal]

holy fuck, 6200 dealers nationwide???

 

[Mook]

heres some more fun..which may be a repost of things already said

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.

 

[Smoke]

Eh,I doubt it'll be as bad as Oldsmobile.A lot of these dealers can't afford a legal showdown with GM in this slower economy.

 

[Half Ass Magic]

You can not arbitrarily force a franchisee out of business without just cause. Each state has franchise laws to prevent this. I can't see how they would get around this and because of that (and because the bondholders aren't going to exchange their bonds for common stock) I'm nearly certain this company is going to file for bankruptcy. It's what should have happened from the getgo and it would have prevented ole' Barak from having his hand in how the business is operated.

Imagine owning a dealership in a smaller town and just getting a letter from GM telling you you're no longer welcome to sell their product, use their likeness, etc. That ruins you.

It sucks because it should have never gotten to this point. The market should have never been this over-saturated with dealers...

They are not just closing random dealers....They are justifying it by closing down dealerships that do not live up to, or have not provided proof that they live up to, the conditions agreed upon in their contracts. As a franchise they agreed to meet certain criteria. They will use these stipulations to justify closing them down......there is a good chance that many will just volunteer, or at least offer minimal pushback, to closing.

-Will

 

[Mike K]

They are not just closing random dealers....They are justifying it by closing down dealerships that do not live up to, or have not provided proof that they live up to, the conditions agreed upon in their contracts. As a franchise they agreed to meet certain criteria. They will use these stipulations to justify closing them down......there is a good chance that many will just volunteer, or at least offer minimal pushback, to closing.

I disagree. If GM could have done so that easily they would have by now. They said they are going after over-saturation as well which is going to force them to have to close down dealers that are completely living up to their contract if for no other reason than the law of averages.

I'd agree that a bunch of dealers are going to look at the stock buy-back as way to cut their losses but I think GM's also going to be forcing a lot of hands.

 

[bluzohh6]

Gm is on the verge of bankruptcy, im willing to bet the dealerships have more of a chance against them than you would think

 

[Smoke]

Gm is on the verge of bankruptcy, im willing to bet the dealerships have more of a chance against them than you would think

Their options are to fight GM in court,which means they won't get paid for years while the case is in hearing/continuance/appeal,or they can take the buyback $$ and run.
With sales slow even the baller dealers won't want to waste money on a legal battle-and the smaller/rual dealers won't have the bread to fight in court period.

 

[bluzohh6]

I think youre wrong

 

[Aircal]

I disagree. If GM could have done so that easily they would have by now. They said they are going after over-saturation as well which is going to force them to have to close down dealers that are completely living up to their contract if for no other reason than the law of averages.

I'd agree that a bunch of dealers are going to look at the stock buy-back as way to cut their losses but I think GM's also going to be forcing a lot of hands.

I think GM was letting the economy close them down up to this point. Quite a few have shut their doors already and all this news isn't going to help sales.