GM Factories, Dealers Tool Up For War

With up to 1,200 dealers and 16 factories set to be uninvited from “the reinvented GM,” union locals and dealerships with their livelihoods on the line are preparing to fight the future. With the UAW leadership on board for an equity position in the new GM, locals are scrambling to show their willingness to give up once-cherished perks to keep their plants open. Bloomberg reports that workers at GM’s Spring Hill plant have ratified a local agreement that “allows GM to schedule its hourly workers for weekend shifts without paying special premiums, ends the policy of paying overtime based on a daily shift instead of a 40-hour workweek and loosens the work rules so that workers may be used for a broader variety of tasks.” Sadly, since Spring Hill’s Chevy Traverse production is likely to be moved to Lansing Delta to take over Saturn Outlook production capacity, this sudden rash of reality probably won’t save the plant.

In addition to Spring Hill, Wilmington, Orion Township and Pontiac are said to be GM’s most vulnerable assembly plants. According to IHS Global Insight, Arlington, Texas; Flint, Michigan; Detroit; and Toluca, Mexico could be on the block as well. Ultimately though, plant closings are still being decided, a reality that pits union local against union local. On the dealer front the plans are better understood. Accordingly, the battle lines are being drawn.

Automotive News [sub] reports that GM has identified “1,000 to 1,200” dealerships which will be receiving “Dear John” letters from S&M honcho Mark LaNeve. This means about one in six GM dealers will see their franchise agreements go unrenewed, not counting the Hummer, Saab and Saturn dealers that are being cut anyway. GM has said it will buy back unsold inventory but otherwise will not compensate owners for the loss of their franchise. All of which has dealership lawyers rubbing their hands with glee. “If GM tries to end its relationships with all these dealers, or many of them, involuntarily, its legal and factual burdens will predictably be extremely difficult,” says one such lawyer. “Remember, under state laws, there’s not a whit of difference in what GM would have to show in a nonrenewal versus an involuntary termination.”

Of course, bankruptcy would supercede state franchise laws, but it seems that GM is still trying to threaten its dealers into accepting their terms with the threat of a Chapter 11 filing. But the dealers (many of whom are cross-collateralized, meaning the loss of a GM dealership could trigger default on their other delerships) are going to call the General’s bluff unless they pay up more than is currently being offered. “If GM wants to get rid of dealers outside of bankruptcy, it’s not just buying back new and unused inventory,” says the president of the New Jersey Coalition of Automotive Retailers. “It’s also buying back special tools, parts, signage and the blue-sky value of the shingle.”