GM, Chrysler to cut up to 3,000 dealers: sources

[Joanne98]

Source: Reuters


DETROIT (Reuters) - General Motors Corp and Chrysler aim to drop as many as 3,000 U.S. dealers and are expected to begin sending notifications as early as Thursday, three people briefed on the still developing plans said.

GM, facing a U.S. government-imposed deadline of June 1 to restructure or file for bankruptcy, is expected to send termination notices to up to 2,000 dealers -- a third of its roughly 6,000 U.S. dealers, the sources told Reuters.

Chrysler, which filed for bankruptcy on April 30, will also tell up to 1,000 of its 3,189 U.S. dealers that it is terminating their franchise agreements, according to the sources who asked not to be identified because the controversial closure plans have not been yet announced.

The moves to shut down auto dealerships underscores how the economic pain caused by the downward spiral of both automakers -- now operating under U.S. government oversight -- is spreading beyond their home base in Detroit.



Read more: http://www.reuters.com/article/GCA-autos/idUSTRE54C64K20090513

[OhioChick]

1. Times are good.....can you feel it?

:sarcasm:

[blue_onyx]

2. Yes I can feel it

The good times just keep coming

[ohio2007]

7. Dyno-mite

[Kevin Cloyd]

3. With fewer dealers getting warrenty service will be harder

and jacking up prices easier. I'm glad our last car was a Honda.

[Blue_Tires]

4. this should have been done years ago

but the numbers should have been gradual...American automakers have long needed to improve the dealer experience; focusing on good service and quality above quantity (i realize they only have but so much control over a dealer, but the look, feel and branding had been long neglected compared to the foreign counterparts)

[fujiyama]

5. Actually a lot of the recent cuts could have been done a while back

Cutting brands should have been more gradual as well, though I think expanding to the level GM did in the first place was pretty stupid.

Part of the reason Ford is still holding on is because they've been making the required but difficult cuts for several years now, much of it put in place when Mullally started there. Of course, another smart thing was putting everything up for collatoral and taking out money before credit tightened (that's more dumb luck than anything I think). It's a painful process and usually the wrong people face the chopping block (and useless managers often end up staying on), but it's still better than going bankrupt.

[Psephos]

8. Actually, because of state franchise laws and other concerns, they couldn't

GM built its dealer network when it alone had more than half of the US market. Right now it has 17%.

Outside of bankruptcy, State franchise laws and dealer contracts would cost GM tens of millions of dollars per dealership to close one down, plus the inevitable years in court, huge legal costs, ongoing bad publicity and brand damage, etc. And there are thousands of dealerships that need to go.

[fujiyama]

9. Ah did not know that

Thanks for pointing it out. I didn't really realize how difficult it is to close down dealership franchises. I still think they made a mistake expanding to the level they did. I never understood what the purpose of taking ownership in companies like Hummer and Saab was. And as cool as the classic muscle cars were back in the day (I love Firebirds and Trans Ams), Pontiac's relevance was long past. I never understood the point of having several brands practically competing against each other.

It's just awful to see it unwinding the way it is. It has been a very difficult time for many people in this state, including myself to some extent. And the inevitable outcome is that this will hurt many people in other states as well (as has been pointed out the thousands of dealership owners and employees).

I hope they are able to come out of their likely bankruptcy stronger and healthier. Hopefully their focus on the four core brands will be a better way to go, though I think even four is one or two too many.

[Hannah Bell]

11. why do you think their "bankruptcy" is being enabled? precisely so they can

break their contracts.

seems they're inviolable only when they involve golden parachutes for banksters.

[Psephos]

13. Why the scare quotes?

Chrysler is bankrupt, and would already have been liquidated if not for the government loans. GM is in precisely the same sudden-death position, and will file on June 1.

I don't see any golden parachutes for banksters (your term). Quite the opposite - it looks like secured lenders are going to get hosed, despite their first-dollar contractual protections, and equity holders completely wiped out.

[Psephos]

12. good points in your post

And yes, I loved the Firebirds and Trans Ams too (have to make do with the new Camaro, I guess).

People outside of Michigan seem to have difficulty grasping the wreckage created by the destruction of the auto industry.

[pscot]

6. A story on Market Watch yesterday

estimated that up to 150,000 layoffs would result from the closures, with knock on effects hitting suppliers, accountants, attorneys, newspapers and charities. It said the average dealership spends about $400,000 a year on advertising and generates about $80,000 in annual contributions to charities and civic causes. Not to mention retired jocks.

[Old Hob]

10. so much for the "getting worse slower" argument. nt