GM tells 1600 US dealers “it’s over”
May 16, 2009 by David Twomey
General Motors Corporation has said it will drop about 1600 US dealers as it struggles to slash billions of dollars in operating costs and debt ahead of an anticipated bankruptcy filing by the end of this month.
Taken together with a similar announcement by bankrupt Chrysler LLC, now in a merger with Italian carmaker Fiat, a day earlier, more than 2300 US car retailers have been put on notice that the two embattled companies are eliminating them.
Reuters Newsagency said the unprecedented closures under the direction of President Obama’s administration put an estimated 100,000 jobs at risk and showed the economic pain from the collapse of the two Detroit-based carmakers spreading across the United States.
“This is going to be a mess,” said Atlanta-based dealer consultant Jim Ziegler. “These dealerships are crucial to the local communities. Dealers are big advertisers. There will be a lot of ripple effects.”
GM said it planned to drop about 1100 of its smaller and less profitable dealerships by letting their franchise agreements expire when they come due in October 2010.
The company also expects to drop another 470 dealerships as it cuts its Saab, Hummer and Saturn brands.
After other dealerships fold or merge in coming months, the plan is for GM to end up with about 3600 showrooms by the end of next year for its Chevrolet, Cadillac, Buick and GMC brands.
That would represent a 40 per cent reduction in GM’s far-flung dealership network that has been protected until now by a patchwork of state franchise laws that made carmakers reluctant to move quickly to drop dealers.
GM spent more than US$1 billion to close its Oldsmobile division and shut down about 2800 dealerships earlier this decade, an experience that made it reluctant to take on its widely recognised problem of having too many dealers competing for a shrinking share of US vehicle sales.
GM is not offering dealers any compensation this time but offered to help them wind down their businesses.
Reuters says the risk of a drawn-out legal battle is another reason analysts believe it will follow Chrysler into a bankruptcy filing.
GM dealers targeted for closure were notified on Friday by letter, while those who were spared received no letter.
The National Automobile Dealers Association had lobbied the US Congress and the automotive task force under the US Treasury Department to stop or slow the closures.
“We view GM’s action with a profound sense of sadness and disappointment,” the business group said in a statement.
Print it: 
i really feel for all those honest workers that have lost their jobs as a result of GM’s incompetence. They should all go and work for Ford or Chrysler/Fiat just to rub salt in GM’s wounds.
Well it just had to happen. Too many dealers cutting each others throats in a shrinking market = no profit. Dealers soon won’t be able to afford the huge over heads to have big show rooms and yards full of cars for sale. Eventually i think we will see customers ordering cars directly from the factory through shop front dealers who might hold five or ten cars in stock. No test drive, no trade ins. We will call you when the car turns up.
Shak.
No, I don’t think that these guys going to work for Chrysler/Fiat is a particularly good idea. That outfit is in a race with GM to see who can go down the plughole fastest.
Salesman.
You’re close. The long-term answer is manufacturers pooling the inventory in centralised locations rather than forcing it on dealers who only duplicate it then cut each others throats competing for deals. No unsold stock at dealerships, demonstrators owned by the factory and used only for test drives, not for salesmen to drive home in.
well i cant see the americans importing cars form Holden with the mega job losses that has\will occured in America………and who really knows if GM will survive at all?
I think if they do happen to survive they will only concentrate on building cars in America for America as they have\will sold off all their overseas concerns, which will happen to Holden hopefully.
GM will survive LSD. There is no way any American President is going to let either GM or Ford close. The current President has said this on a number of occasions. Chrysler, who knows.
T/S,
you are certainly on the money.
The rest of the retail world is almost there.
Im surprised you didnt include higher number of internet sales in your theory aswell……
sorry salesman, the whole no test drive, no trade in wont work, the rest might. Any dealer who wont offer trade ins may as well close their doors now because the (maybe) 50% of buyers with trade ins will simply go elsewhere. You should know that this is probably the biggest industry where people dont use 100% cash/finance to acquire their purchase.
Ford wont close they are on the mend……..but the real facts about how bad GM are has yet to come to the surface. Watch this space……..lol