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GM will pay terminated dealers only for inventory, parts

GM will pay terminated dealers only for inventory, parts

Jamie LaReau

Automotive News | April 29, 2009 – 11:56 am EST


DETROIT — General Motors says it will repurchase unsold new vehicles and parts from dealers whose franchise agreements are terminated, but the automaker won’t compensate dealers for the loss of the franchise.

GM says that in 2010, it will not renew the franchise agreements of dealers at up to 1,200 dealerships with low scores on various performance measurements. Many of the dealerships are in metro markets with too many stores.

The 1,200 terminations are part of a GM plan to reduce its dealership count to 3,605 by the end of 2010.

As of Jan. 1, 2009, GM had 6,273 U.S. dealerships, excluding Saab, according to the Automotive News annual census.

Yesterday, GM sales chief Mark LaNeve spelled out the termination plan to dealers in a special broadcast. A dealer who listened said: “There was no money for anything other than what the franchise agreement calls for — meaning we can send back new cars, parts, special tools and some signage.”

The dealer declined to be identified.

Starting in May, GM will meet with or send a letter to about 1,000 to 1,200 GM dealerships informing them that “they will not be part of a reinvented GM going forward, and we’ll work on a transition with them,” LaNeve told Automotive News on Monday.

LaNeve characterized the group of dealerships as “very poor performing and not adhering to the sales and service agreement obligations.” For example, the dealership might be dualed with a non-GM brand or have poor customer service ratings, inadequate facilities, poor new-car sales or inadequate working capital.

In addition to the 1,200, LaNeve said that:

• About 500 dealerships will close by year end out of normal attrition, other dealers who listened to the broadcast said.

• GM expects to lose an additional 500 dealerships that now handle Hummer, Saab and Saturn vehicles. The company is trying to sell all three brands. GM is phasing out Pontiac by the end of 2010 and will lose 35 stand-alone dealerships at that time, LaNeve said.

• GM will seek to close another 500 or so dealerships, mostly in overcrowded metro markets. LaNeve declined to say whether GM would provide extra cash to do those deals.

LaNeve said: “I look at that last group as more than likely we will get involved with the dealers who are going forward with GM and work with them as buy-sells and consolidations.”

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