General Motors notified 1,100 dealers that it will not renew their franchise contracts, as the automotive giant looks to restructure in the wake of the economic recession and slumping new car sales.
Unlike Chrysler, which cut 789 dealer locations effective nearly immediately, GM will follow a wind-down process, allowing the targeted dealerships to gradually reduce vehicle inventory, parts and staff through to October 2010, when most of their franchise contracts expire.
According to GM, the dealerships closing are underperforming and make up a very small sales volume.
Combined with about 470 Saturn, Hummer and Saab dealers GM is looking to divest itself of, the company plans to eliminate 2,369 — or 40 percent — of its 6,000 dealers by the end of 2010.
In a press statement, GM said, “While additional cuts will be made, we believe the vast majority, over 90 percent, of the remaining dealers will be offered a chance to remain with GM. However, specific dealer issues, further attrition and additional possible dealer network actions are expected to bring the number of future GM dealers to around 3,600 by the end of 2010.”
“We have said from the beginning that our dealers are not a problem but an asset for General Motors,” said Mark LaNeve, GM vice president of Sales Service and Marketing. “However it is imperative that a healthy, viable GM have a healthy, viable dealer body that can not only survive but prosper during cyclical downturns. It is obvious that almost all parts of GM, including the dealer body, must get smaller and more efficient.”
“In response, we are letting them know about our long term plans. GM’s viability plan calls for fewer, stronger brands as well as fewer, stronger dealers. We have taken a very difficult step by identifying those dealerships we’d like to keep in the GM dealer network and those with whom we will have to wind down our business relationships,” LaNeve said.
Also unlike Chrysler, which made the names of its closing dealership public as part of its court filings, GM is not releasing the names of any dealers targeted to close. As independently owned businesses, dealer owners will make their own decisions if and when they want to make this information public.
The dealerships being cut by GM and Chrysler employ about 187,000, the National Automobile Dealers Association estimates.
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