By on October 30, 2009

Back like deja-vu?

The recent revelation that congresspeople have been successful in coercing GM to rescind dealer closures in their districts, has the rest of our elected representatives (not to mention GM itself) sitting up and taking notice. In a conference call with Michigan’s congressional delegation, Fritz Henderson said GM was close to a deal which would restore a number of “mistakenly” closed dealerships. But GM hasn’t met with rejected dealers in weeks, and the Committee To Restore Dealer Rights is unaware of any such agreement. “[Henderson] was very vague, and the plan sounded inadequate to me,” Michigan Republican Hoekstra tells Automotive News [sub]. “He explained, for instance, that they might reopen some franchises if they found errors, but he didn’t say what those errors might be.” Henderson also rejected the dealer demand for compensation of $3,000 per vehicle sold in 2006, 2007 and 2008, further supporting suspicions that GM doesn’t have a deal at all. So what is happening?

I think GM is telling Congress: ‘We’re close to a deal, you don’t have to do anything.’ But GM isn’t doing anything. They’re just playing out the string because rejected dealers can’t hold out that long

Hoekstra may well be right. Without a compensation offer on the table, government-ordered arbitration between GM and the rejected dealers won’t go anywhere. More importantly, Henderson’s use of the term “mistakenly closed” illustrates how much pressure GM has been under from representatives to reopen dealers in their districts. If a number have already succeeded in getting GM to re-open their dealers, it’s only a matter of time before the floodgates open. Remember, GM only accepted arbitration because a bill was working through congress that would have restored all the culled dealer franchises. If arbitration is failing, GM’s only option is to hold off congressional interference for as long as possible, in hopes of as many dealers croaking as possible. And now that everyone knows some representatives have succeeded in rescuing their campaign donating home-district dealers, the rush will be on. All of which further pits the legislative against the executive branch, raising the specter of more, not less, government interference in GM and Chrysler.

Get the latest TTAC e-Newsletter!

20 Comments on “Under Congressional Pressure, GM Hints At Dealer Restoration...”


  • avatar
    John Horner

    I would love to see someone demonstrate how closing dealerships has improved GM and Chrysler’s sales and profitability.

  • avatar
    Dynamic88

    I’m solidly on GM’s side in this. If anything, the dealer cull wasn’t nearly aggressive enough. I hope GM can keep them closed and avoid the political pressure. They don’t need these dealers dragging them down.

  • avatar
    Da Coyote

    You know, we really do need scientific notation to adequately express the incompetency of our government (either party – makes no diff, they’re there because they cannot do anything productive). The law of unintended consequences rules – as usual.

  • avatar
    Logans_Run

    This is in part why they never should have been bailed out in the first place. You now have politisization of almost every aspect of what GM does. Can’t cut under-performing dealers, can’t cut union benefits or throw the pension fund liabilities out the door to PBGC. I don’t give a shit about the “loss of jobs” argument. This is a company that was on its way to financial failure and will be a ward of the American taxpayer until it finally breathes its last bailout-breath. Thanks to this and the bank bailouts we are all TFTS=too f’ed to succeed.

  • avatar
    210delray

    “Mistakenly” closed dealerships…Riiiiight.

    And the sky is green.

  • avatar
    psarhjinian

    I would love to see someone demonstrate how closing dealerships has improved GM and Chrysler’s sales and profitability.

    This is a good point. I can see how closing brands saves money, but why dealerships? Can it really cost GM much direct money? I mean, I can understand based on the idea that there’s a small cost to supporting dealers, or that many mediocre dealers present a poor image, but that seems like a drop in the bucket.

    It would have made more sense to kill Buick and GMC as well as Pontiac, let erstwhile B/P/G dealers sell Chevies and Caddies, and let attrition to the work.

  • avatar
    jkross22

    I’m with psar on this, but I would add that closing dealers makes sense from a more long term, macro point….

    The more dealers, the more people selling the same car, the more price competition and lower sale price and the lower residual value as a result.

  • avatar
    gslippy

    It’s hard for me to believe that the restoration of a local dealership really tips the electorate’s vote in favor of their Congressional representative.

    For me, if I heard that my local representative successfully lobbied to save a dealership, I might vote against them for it.

    GM’s lifespan is shortened with every dealership that is restored. The post-cull number of GM dealerships was still way higher than Toyota’s. Here in western PA, you can’t swing a dead cat without hitting several GM dealerships. With few exceptions, they shouldn’t be restoring any of them.

  • avatar
    Dynamic88

    I can see how closing brands saves money, but why dealerships?

    Well, here’s one thing – recall the rollout of the new “Bu”. People responded to the hype and went to the dealer to take a look, but a lot of dealers didn’t have a new ‘Bu to show.

    When there are 4000+ Chevy dealers, and each one needs let’s say a minimum of 8 Malibus -to have a selection of trim levels, engine sizes, etc., then Chevy has to crank out 32K Malibus just for the initial stocking of dealers.

    With half as many dealers, they’d only need to crank out half as many cars, saving enormously on their main costs of production – glass, steel, rubber, plastic, etc.

    Of course, it will all be for naught if they only sell half as many cars from their new, smaller, dealer network. But the idea is that people will drive a little ways to buy a new car every 5 years. (Just as they currently do to buy Hondas and Toyotas).

    Dealer turn would have to be twice as fast, which would be fine for dealers, and Chevy could make cars more in line with the actual demand, rather than pumping out a lot at the start of the model year, only to see them languish on the lot. W/o as many cars sitting around they might also be able to cut back on incentives which is what is killing their margins.

    To use my city, as but one of many many examples, I have 5 Chevy dealers within 10 miles of my house. If you go out to the small towns surrounding my city 12, 14, 16 miles away, it’s obvious that almost all of these people could also be served by driving into my city. (Most of them drive that far to go to work M-F anyway) In fact, about half the existing dealers in my city could be culled, and there would still be plenty of opportunity to buy a Chevy.

    Another way to look at it – it’s not as if there is nobody who lives out in the boonies who drives a Toyota or a Honda.

  • avatar
    vandstra

    Can someone tell me exactly how you “restore” a dealer that has been closed?

    For example, the Chrysler/Jeep dealer down the road was closed. Place had been open less than 5 years. Signs are off the building, there was an auction for the fixtures, etc. How does one economically go back and rebuild that business and get the place functioning again? You are going the “right” a “wrong” by pouring more money into a decision that was made to save money? WTF?

  • avatar
    psarhjinian

    It’s hard for me to believe that the restoration of a local dealership really tips the electorate’s vote in favor of their Congressional representative.

    No, but dealers have a lot more extra-electoral clout than Joe and Jane Wage-Slave, which comes in handy when the election does come around and you need someone to fund your campaign. If nothing else, they supply a lot of bad barbequed chicken.

    When there are 4000+ Chevy dealers, and each one needs let’s say a minimum of 8 Malibus -to have a selection of trim levels, engine sizes, etc., then Chevy has to crank out 32K Malibus just for the initial stocking of dealers.

    Again, while it does cost them money, there’s no way it costs them what it does to keep the holistic “lights on” at Buick and GMC. How many millions went into developing the likes of the Regal, Lacrosse or Traverse? By my count, probably a lot of Malibus’ worth.

  • avatar
    jackc10

    Many auto dealers are big $ contributors to local, state and national political races.

    When running a statwide or big Congressional district race, one of the first things is to get a dealer to provide a car and gas for the candidate.

    I have not much sympathy for GM and Chrysler dealers but many have been forced to spend big $ by the manufacturers to build some over the top facilities. Lexus dealers have also, but they have Lexus to sell and service. GM and Chrysler dealers did not but they are out big $ in a facility that we do not presently expect to be a used car dealer. Of course satisfaction will be coming from the taxpayers’ pocket via GM and Chrysler so I would say the dealers made a bad decision. I am not being consulted by the Obama Administration on this matter.

    It might also seem obvious, but with dwindling dealers, there is a very weak market for former car dealership sites.

  • avatar
    Dynamic88

    Again, while it does cost them money, there’s no way it costs them what it does to keep the holistic “lights on” at Buick and GMC. How many millions went into developing the likes of the Regal, Lacrosse or Traverse? By my count, probably a lot of Malibus’ worth.

    You are conflating two issues. I’m not arguing that GM should or shouldn’t kill GMC/Buick as opposed to reducing the number of dealers. I’m just pointing out why they need to cull a lot of dealers, and one of the ways they save money doing it. Maybe they should also kill some brands (everything but Chevy) but that would be in addition to a dealer cull, not instead of a dealer cull.

  • avatar
    mtypex

    Restore the dealers! Restore Pontiac, Viking, Marquette, LaSalle, Geo, and Saturn too!

  • avatar
    seanx37

    You know, doesn’t basic math enter into things somewhere? Car sales are down by what 45% over the last few years? GM sales down by more than half. Shouldn’t at least that many dealers go out of business one way or the other?

  • avatar
    GS650G

    How much effing tax money is THIS going to cost us?

  • avatar

    GM is and has been run by complete idiots who have absolutely zero clue what they are doing.

  • avatar
    lw

    What a mess.. 100% of the GM dealers would be gone if GM hadn’t been bailed out.

    Hard to find a silver lining, but I guess if congress gets overwhelmed with requests, maybe it will delay all the other sludge that they is working on.

  • avatar
    sitting@home

    Politicians’ main concern is jobs; chiefly the 535 jobs in Congress. Despite (presumably) voting for the package that made GM government owned with it’s implications for brand, factory and dealership closures, they will back-peddle faster than a clown on a unicycle if they think the fallout will put their own job in jeopardy.

  • avatar
    panzerfaust

    Amazing, Congress is pressuring GM to un do what GM felt pressured by Congress to do.


Back to TopLeave a Reply

You must be logged in to post a comment.

Subscribe without commenting

Recent Comments

New Car Research

Get a Free Dealer Quote

Staff

  • Contributing Writers

  • Jack Baruth, United States
  • Brendan McAleer, Canada
  • Marcelo De Vasconcellos, Brazil
  • Vojta Dobes, Czech Republic
  • Matthias Gasnier, Australia
  • W. Christian 'Mental' Ward, Abu Dhabi
  • Mark Stevenson, Canada
  • Cameron Aubernon, United States
  • J Emerson, United States