General Motors is going a different route than Chrysler LLC in regards to their dealer network. Rather than just say adios, you're done. GM is electing to not renew sales and service agreements with 1100 dealers when they come available for renewal in the 4th quarter of 2010.
Dealers targeted were stores that have poor annual sales 35 units or less per year. That makes up 400-500 of the dealers. The rest are not meeting their required sales and service performance, CSI, etc. that are performing below average. These 1100 dealers make up 7% of GMs yearly sales.
There are about 500 dealers who are dedicated to Hummer, Saab & Saturn brands. There will be a further update regarding these brands and those dealers in the next week or so. General Motors North America Vice President Vehicle Sales, Service and Marketing, Mark LaNeve did make it clear that dealers of these three brands "will exist outside of General Motors next year".
It was made clear that without GM filing bankruptcy, that these letters will be hard to enforce. This is why GM is putting the options into the dealers hands to enforce whether to wind down business and close, or find another brand to carry.
GM's intentions are to land somewhere in the neighborhood of 3600-4000 dealerships.
"This is one of the most difficult decissions we have as part of our restructuring" LaNeve said.
In conjunction with conversations General Motors started with its U.S. dealers today, GM issued the following statement -->
GM Statement Regarding Dealer Network Communications
As noted in our recent S-4 filing and updated Viability Plan, General Motors plans to reduce its dealer network from 5,969 stores today to approximately 3,600 by the end of 2010.
This process starts today, as GM begins contacting dealers regarding its long term planning. Approximately 1,100 underperforming and very small sales volume U.S. dealers will be advised that GM does not see them as part of its dealer network on a long-term basis. In most cases, existing franchise agreements run through October of 2010.
In addition, we will be updating about 470 Saturn, HUMMER and Saab dealers on the status of those brands and we will be discussing how the remaining dealers will support our retail plans going forward. 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, as described in the Plan. The actual number could vary given levels of attrition, etc. outside of GM’s control.
“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.
As independently owned businesses, dealer owners will make their own decisions if and when they want to make this information public. GM is not releasing the names of any dealers.
“We are not terminating any dealerships today,” LaNeve clarified, “We will be talking to all of our dealers over the next few weeks, letting them know now in the spirit of open communication, so they are advised well in advance, about our long-term plans and their role in them. Long term, GM should have fewer, healthier dealers, maintaining GM’s current high customer satisfaction ratings, with more sales per outlet.”