General Motors Corporation began contacting about 18% of its dealers today to let them know that their franchise to sell new vehicles would not be renewed. Yesterday in an SEC filing General Motors said it plans to reduce its dealer network from 5,969 stores today to approximately 3,600 by the end of 2010. GM said the plan would not change if it files bankruptcy at the end of this month.
This culling process starts today, as GM sends letters to dealers regarding its long-term retail outlet plans. Approximately 1,100 under-performing 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, their existing franchise agreements run through October of 2010. Most of these letters should have been received this morning.
GM refused to release the list of dealers contacted. As independently owned businesses, dealer owners will make their own decisions if and when they want to make this information public. This makes it difficult for car buyers to plan. Under current law, the dealers could remain with GM until the end of the sales and service agreement. A bankruptcy would allow GM to terminate agreements immediately as Chrysler LLC did yesterday.
The small volume dealers average 35 vehicle sales annually. Those dealers will be contacted during the first week in June to work with GM to wind down their business. Unlike Chrysler, GM is not immediately terminating dealers. GMAC’s financing contracts require that GM take back the vehicles in inventory. Terminated Chrysler dealers own their inventory. GM estimated that very few of its dealers are dualed with Chrysler.
Additional GM dealer cuts will be made. (more…)