The controversy surrounding General Motors pending reorganization continues to attract disapproval from related firms struggling to survive the effects of GM’s forced transition to a drastically smaller auto company. For owners of GM vehicles and prospective buyers, the next 30 days will be critical time when the choice of a buying a car, or having it serviced at a dealer could affect the value of what is still the second largest investment – after a home — that most Americans make. GM has said it will close 2,641 dealer locations from its existing 6,246 stores by next year.
The latest criticism comes from a statement by the National Automobile Dealers Association, which said that GM’s plan to eliminate dealers came as a “surprise” and will hurt sales, even though the closings were basically outlined by GM back in February.
There is also the now real threat of lawsuits by dealers against the company that could drag on for years. It is clearly not in the interest of GM vehicle owners to get caught in the middle of litigation, even if their warranties will be honored. Owners should be confident that the dealer they are using has a future, and that its employees are properly compensated and following the authorized service procedures. Can a customer expect fair treatment from a dealer that is financial threatened?
“GM’s decision to radically cut its dealer network over the next 18 months comes as a surprise. We understand the realities of current market conditions. But nevertheless, we feel a strong sense of disappointment that GM has, for whatever reason, decided to accelerate dealer consolidation in such a drastic way,” said John McEleney, chairman of the National Automobile Dealers Association.
NADA has asked GM and Chrysler dealers to contribute $2,000 for each store to a legal fund in the event of a bankruptcy. “It is critically important that dealers have legal advisers with expertise in bankruptcy and corporate restructuring,” Nada said to GM dealers in a letter. “ If GM were to file, its bankruptcy would almost certainly be one of the largest and most complex corporate reorganizations in the nation’s history.” Chrysler dealers got a similar plea. Bankruptcy or not, the threat of legal action is real.
GM said it is moving forward with dealer closings to meet the terms for continued loans imposed on it by the Auto Task Force. The GM goal is to accomplish this reduction in an “orderly, cost-effective, and customer-focused way.” GM said that fewer U.S. dealers will allow for a more competitive dealer network and higher sales effectiveness in all markets. But it didn’t provide any information that consumers could act on now. (more…)