By on April 27, 2009

GM’s new new new new new new pre-bankruptcy turnaround plan calls for a dealer cull to end all dealer culls. Until the next dealer cull. “Working with its dealers, GM anticipates reducing its U.S. dealer count from 6,246 in 2008 to 3,605 by the end of 2010, a reduction of 42 percent. This is a further reduction of 500 dealers, and four years sooner, than in the February 17 Plan. The goal is to accomplish this reduction in an orderly, cost-effective, and customer-focused way. This reduction in U.S. dealers will allow for a more competitive dealer network and higher sales effectiveness in all markets. More details on these initiatives will be provided in May.” Yes, how about those details? While “working for dealers” is clear code for a payday, there’s no way GM—and by that I mean you and me—can take the hit any such payoff would require. Or could they? The mind boggles.

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24 Comments on “Bailout Watch 510: GM To Terminate 40% of Its U.S. Dealers...”


  • avatar
    friedclams

    How is reducing the sales outlets by 40% “customer-focused”? Is choice a bad thing?

  • avatar
    TexN

    Geez! Let’s just eliminate the government as middle-man.

    Dear Uncle Sam,
    Please forward a list of GM dealerships in my area that will be “incentivized” to go away so I can swing by and drop off a bag of cash to ease their pain. Also, what form should I use to claim them as a dependent on my 2009 tax return?
    Regards,
    Tex

  • avatar
    ca36gtp

    The dealers need a bailout! Hurry, SuperObama!

  • avatar
    26theone

    It would be insightful to know exactly how GM can forcefully close a dealership. If there are three dealerships in a city that sell nearly the same amount of cars.. who gets shut down?

  • avatar
    taxman100

    Contracts are for the unwashed masses. Contracts do not matter to the Messiah Obama, as he is supernatural, and not of this world.

    What is his is his, and what is yours is his.

    Welcome to America, 2009!

  • avatar
    John Horner

    GM dealers are dropping like flies without getting any compensation from GM. This is not going to end well. Getting rid of “excess” dealers is going to cost GM sales and will do precious little to reduce costs. Our town of about 40,000 people just lost the Chevy dealership. The only in-town dealer now is a Ford dealer. Advantage Ford.

  • avatar
    DPerkins

    Last fall did GM not argue that bankruptcy would close thousands of dealerships and put thousands and thousands out of work?

    Well, now you lose 42% AND the government is putting in billions. Worst of both worlds, no?

  • avatar
    bluecon

    GM can’t just rid themselves of dealers outside of bankruptcy. Unless President Hopeychangey changes the law. (read the Constitution, it says the President is just like a King)

    So now most of the jobs are lost and billions of taxpayer dollars are transferred to the UAW and the companies. This makes sense?

  • avatar
    jpcavanaugh

    WSJ points out today that GM has 338 dealers per point of market share. Chrysler 286, Ford 270 and Toyota 74.

    I’m not arguing that Toyota’s number is the right one, because its a big country. But, for each point of market share, GM spreads this over 68 more dealers than does Ford. Too many dealers, too few sales, all the dealers starve.

    GM’s legacy is a company that once had 50% of the market. Its dealer body has bee until recently, unfortunately, still structured that way. A dealer body where everyone is starving and will do anything to make a sale is not foundation to build upon.

  • avatar
    superbadd75

    GMAC will be of some help as more dealers get their floorplans yanked. I know of one such dealer closing in this area so far because of it, but more may be teetering on the edge for all I know. As for the rest, I don’t know where GM is going to be getting the money for these payoffs, but I have an idea. Although the imminent C11 may allow them to walk away from that too, I don’t know.

    As for how this helps customers, and how they decide who stays and who goes, I suspect the choice will be made partially by volume, and partially by CSI (customer satisfaction index) scores. Poorly performing dealerships will most likely get shuttered, and in the case of several close dealerships with similar sales numbers, I’d suspect the ones that piss customers off the most will probably be dismissed.

    I wonder about the rural locations, in areas where customers would otherwise have to drive a couple of hours to reach a car dealership. GM has enjoyed a serious advantage over Toyota in this aspect, and shutting down 42% of their network is bound to affect this adversely.

  • avatar
    TexN

    I would point out that the government playing fast and loose with “rules” and the constitution is not unique to Obama. Anyone remember Bush, Cheney, Rove, Condi, Gonzales, etc.? This gang wrapped a whole bunch of hooey in the blanket of “executive privilege”.

  • avatar
    MikeInCanada

    “3,605 (dealers) by the end of 2010,”

    Here’s the real problem – even that number is still 50% too many. Toyota has approx 2000 dealers in NA. So, why would GM need almost twice as many just to sell approximately the same number of cars?

    As it was said earlier in another GM article today here on TTAC – they’re just softening everyone up for next months Chap 11.

  • avatar
    ca36gtp

    I would point out that the government playing fast and loose with “rules” and the constitution is not unique to Obama. Anyone remember Bush, Cheney, Rove, Condi, Gonzales, etc.? This gang wrapped a whole bunch of hooey in the blanket of “executive privilege”.

    I would point out that I’ve heard a lot of this since Obama started wrecking the place:

    “Bush did XXXXX, so you can’t criticize Obama for it” which is insane.

  • avatar
    MikeyDee

    The end result…less cars being made in the world and less dealers to sell them. Beware the “great car shortage of 2011”. There is no question this is coming.

    If you’re a dealer (non-GM or Chrysler), start hoarding cars now.

    If you’re driving an old car, forget the poor economy and buy a new car now. You won’t be able to get one in 2011.

  • avatar
    psarhjinian

    It would be insightful to know exactly how GM can forcefully close a dealership.

    Credit, or lack thereof.

  • avatar
    yankinwaoz

    If you’re driving an old car, forget the poor economy and buy a new car now. You won’t be able to get one in 2011.

    I’m in that boat and I was thinking the same thing. I just have no clue how I would pay for it. Is anyone doing car loans or is that credit market still locked up?

  • avatar
    jpcavanaugh

    Another thought. At this clean sheet of paper moment (as astutely observed by Pch101) wouldn’t this be the time to decide how a company should really be selling cars and trucks in the 21st century? Traditional dealers? A Saturn/CarMax approach of no-haggle price and all-out customer service? Should the manufacturer take a stronger role by directly taking on the sales and/or service function? Or should it be a combination of these things, or another idea altogether?

    I do not claim the wisdom to pick one for GM or any other company right now, but it seems to me that if a company were to start fresh, these would be questions to ponder. But not GM. Introspection has never been its thing. It is going to do what it has always done, only smaller. Pity. It is wasting an opportunity.

  • avatar
    TexN

    ca36gtp,
    I would point out that I’ve heard a lot of this since Obama started wrecking the place:

    “Bush did XXXXX, so you can’t criticize Obama for it” which is insane.

    Don’t put words in my mouth. The key word I used was “unique”. Both parties have had their hands in the taxpayers’ pockets for a LONG time. Feel free to criticize either party or both parties. You’d be correct. I take offense to either side claiming the high ground over the other side.
    Tex
    p.s. As I’ve stated in the past, I am an independent voter just for the record………

  • avatar
    Landcrusher

    There will be plenty of cars in 2011 to meet demand. Fear not.

    No one will save money by borrowing to buy a car now, rather than saving the money and buying cash in a few years. If there is a short term shortage of new cars, simply wait it out. It cannot persist.

  • avatar
    bill301972

    In response to yankinwaoz:

    I’m in that boat and I was thinking the same thing. I just have no clue how I would pay for it. Is anyone doing car loans or is that credit market still locked up?

    I’m in the car business (Ford) in the southwest and I can say that there is indeed vehicle financing available. The key difference is that lending sources are only doing deals that make sense now.

    They want to see you in a vehicle loan that matches your income. They want you in an equity position (down payment). They want to see stability (job time, time in residence etc…)and they are weighing past derogative marks on credit.

    Basically, if you are buying a vehicle in a responsible manner, you will be able to get financed. The single biggest factor that we are seeing in our dealership right now is down payment.

  • avatar
    MikeyDee

    Landcrusher, here is my reasoning…

    All the carmakers are scaling back production now. Once they are slowed down, it takes a while for them to ramp up again. We know that whatever the “new” GM looks like, they will be making fewer units and selling them in fewer dealerships. Same for Chrysler. As for the thousands of cars sitting on ships docked at sea, I would not want to buy a car who’s engine had not been cranked up in over 1.5 years.

    Add this the fact that a lot of car owners are holding on to their old cars because they’re scared to jump in and make the big commitment, or they can’t get loans because the banks are really tough right now. All these folks will need a new car in a few years. Where will they find them?

  • avatar
    fincar1

    I was going to say something about this in reply to a post of John Horner’s yesterday, something to the effect that too many dealers for a company with too small a market share means not enough cars on each guy’s lot. Only way to fix that? Cut the number of dealers.

    How this gets done will make a lot of difference: if people in Whistler have to go all the way to Vancouver to buy a GM car rather than dealing with Greg Gardner in Squamish, that’ll be more of a loss than if one of several Chevy dealers in, say, Vancouver closes.

    There has been one interesting change in the dealership picture in my local town: All the GM lines are under one management now, rather than Chev/Cad in one and Pontiac/Buick/GMC under another. Of course, this is a large multi-dealership operation, which also owns the Chrysler/Jeep (new building last year), Toyota, and Honda dealerships in the same town, and a couple of Acura and Lexus dealerships closer to the Microsoft campus. Also, one of the larger independent lots specializing in last-stop-before-the-wrecking-yard cars has disappeared.

  • avatar

    This gang wrapped a whole bunch of hooey in the blanket of “executive privilege”.

    Read about the abuses of the Wilson and FDR administrations in terms of executive privilege and civil liberties. You’ll gain some needed perspective.

  • avatar

    The great car shortage is an interesting theory indeed. Don’t bet on the parked cars not selling. There are 2 reasons, count them just TWO reasons, a car doesnt sell. A) it’s not ready or B) it’s too high. Shut up, I understand, color, mpg, all that shit is valid, but weigh details into category B on my theory . A or B period end of story. When they get cheap enough, they sell.

    I could see more of the great truck/suv shortage than great car shortage coming into play in 2011.

    Disagree with start inventorying non Chry and GM new units now, 1.7 years is a long ass time to sit on unsolds betting on the come. If your correct, the interest during the hold would eat up enough hay to take the fun out of it.

    It cost ave 5 bucks a day to inventory and insure a piece of unsold stock. 300 AVAILIBLE FOR IMMEDIATE DELIVERY we’ll no shit…these damn things eat alot of hay, they need to go. Wonder what it costs to insure and interest unsolds on a manufacturer’s income statment?

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