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GM announcing retained, rejected dealers

November 15, 2010

In a race to restructure the company and its debt by June 1 or else file for bankruptcy protection, General Motors Corp. said it would begin identifying the fate of its franchised dealers by about May 14, this newsletter’s deadline.

GM intends to chop its dealer network by 42 percent, to 3,605 stores, by the end of 2010. GM CEO Fritz Henderson, GM’s chief executive, said the company plans to have an "orderly wind-down" of inventory and work with dealers that will not receive new GM product in the future.

"This is something that will take place over a reasonable amount of time," he said.

Henderson stressed it wouldn’t be a one- or two-month process but something that will be worked on through 2009. "We’re going to try to do the right thing for our customers," he said.

GM reportedly intended to notify 1,100 dealers that it would not renew their franchise agreements when they expire in September 2010.

Some GM dealers are organizing to fight back. But so far it is unclear how much power they will have to save themselves, especially if GM follows Chrysler into bankruptcy court.

In a May 13 television interview, NADA Chairman John McEleney argued against the rapid dissolution of dealerships.

"We’re not saying that there shouldn’t be consolidation. We have dealers . . . closing every day. (But) the plan General Motors submitted [to the auto task force] was very aggressive," McEleney said.

The NADA chairman said accelerating the timetable for dealer cuts does nothing for the viability of manufacturers. "It just does not make sense," McEleney said. "GM’s expenses will not be cut. In fact, it reduces revenue. It’s counterproductive to what they are trying to accomplish."

McEleney warned of the unintended consequences that could affect the entire industry if dealer cuts were made too quickly and deeply. Hundreds of thousands of new vehicles from dealership closings will flood the market, he said.

"It will destroy the new car market, not just for GM and Chrysler, but for the whole industry," McEleney said.

Bankruptcy protection for GM is becoming more probable with a deadline just two weeks away, the company’s top executive told said.

CEO Henderson holds out hope that GM can restructure without court protection, but he says the tasks to complete before a June 1 government-imposed deadline are large.

The automaker, Henderson said, is looking at its operations country by country to determine where it might have to file for bankruptcy, but he says a U.S. bankruptcy doesn’t necessarily mean GM would file in other locations.

 

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