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GM, Chrysler begin concession talks

November 3, 2010

In a series of historic talks expected to be tense and sweeping at times, General Motors and Chrysler have embarked on formal negotiations with the United Auto Workers, bondholders, dealers and others to transform the automaker into a smaller, viable company.

GM has pledged to revamp labor contracts, reduce debt and shrink the number and type of vehicles it produces to satisfy conditions imposed after the federal government granted the automaker and Chrysler $17.4 billion in emergency federal loans. The loans will ensure the companies survive through March, but each automaker must develop plans by Feb. 17 to ensure long-term viability.

A key element in GM’s restructuring plan submitted to Congress last month is its plan to cut about 27 percent of its 6,400 dealers in the next three years and close, shrink or sell Pontiac, Saab, Hummer and Saturn.

Dealerships are protected by state franchise laws, complicating any plans to downsize. The sharp decline in new car and truck sales has accelerated the shutdown of GM dealerships nationwide, and the sale of the Hummer and Saab brands would further thin their ranks.

The National Automobile Dealers Association expects about 700 dealerships to close this year.

"GM has been and will continue with efforts on streamlining its dealer network through channeling, consolidation and natural attrition," said GM spokeswoman Susan Garontakos.

Offering dealers cash to merge or close is a costly undertaking, one analyst said. GM spent more than $1 billion in settlements with dealers when it eliminated the Oldsmobile brand in 2001.

GM has not shared with dealers its plans for Saturn, where sales dropped more than 21 percent last year.

"If they’re fair with us, we’ll be fair with them," said Rick Galles, a New Mexico Chevrolet dealer who also owns one of the original Saturn dealerships. "If they become combative and say, ‘This is the way it’s going to be, obviously we’ll take a whole different look at it."