Your Tax Money Hard at Work: GM Offers Discontinued Dealers a $1M Kiss Off

Robert Farago
by Robert Farago
your tax money hard at work gm offers discontinued dealers a 1m kiss off

For the last ten years or so, the United Auto Workers (UAW) has pretended to make “concessions” to General Motors while doing nothing more than accepting pay-offs consisting of lump sums and promises to pay lump sums from fictional future earnings. Exhibit R: the fed’s recently promised $2.5 billion cash “top-up” of the UAW’s health care VEBA, ahead of other payment of other lump sums AND a slice of fictional future earnings. Automotive News [sub] reports that GM’s deep-sixed dealers are now playing grease my palm at wounded knee. “General Motors is offering some dealerships $100,000 to $1 million to wind down their businesses over the next 17 months, according to three sources familiar with the proposals.”

Let’s assume the average dead dealer gets a $500,000 kiss off. GM announced it was terminating 1124 dealers. I make that a $562 million pay off (as opposed to a zero dollar FO&D possible under bankruptcy law). I reckon we got a bargain mate! GM’s Oldsmobile termination reported cost GM a billion bucks, back when a billion was more than a rest stop on the way to $100 billion. Or a trillion. So, what do we get for our money?

The money is intended to help dealers sell their remaining inventories. But if the dealer accepts the payment, GM will not buy the unsold inventory. In addition, the dealer must agree not to sue GM until their franchise agreement expires. The terminated dealers also will not be allowed to order new cars from GM, yet they must stay in business until January.

GM’s army of the undead! And what’s with the “until their franchise agreement expires?” Does that mean we’re looking at hundreds of millions in federally-funded lawyers fees defending Government Motors against dealer lawsuits? Sure!

This, no doubt, at the same time that those discontinued dealers will land themselves the Small Business Administration loan guarantees to buy product GM won’t sell them. While we’re at it, I wonder where the funding for the freshly mandated GM dealership upgrade is gonna come from? Hey Tony?

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2 of 9 comments
  • John Horner John Horner on Jun 03, 2009

    I'm on record saying these dealer closures are a bad idea. Paying them cash money to go away just makes it dumber. Paying employees to go away at least reduces a real, measurable ongoing cost. Paying a customer to go away, doesn't.

  • Golf4me Golf4me on Jun 03, 2009

    I don't get it...wasn't one of the advantages of C11 the ability to pare the dealer network without such payouts? They could have done this years ago ala Oldsmobile! At least Chrysler had the balls to cut the cord clean. GM is dithering already in only it's 2nd day of C11. That can't be good.

  • RHD Any truth to the unconfirmed rumor that the new, larger model will be called the bZ6X? We could surmise that with a generous back seat it certainly should be!
  • Damon Thomas Adding to the POSITIVES... It's a pretty fun car to mod
  • GregLocock Two adjacent states in Australia have different attitudes to roadworthy inspections. In NSW they are annual. In Victoria they only occur at change of ownership. As you'd expect this leads to many people in Vic keeping their old car.So if the worrywarts are correct Victoria's roads would be full of beaten up cars and so have a high accident rate compared with NSW. Oh well, the stats don't agree.
  • Lorenzo In Massachusetts, they used to require an inspection every 6 months, checking your brake lights, turn signals, horn, and headlight alignment, for two bucks.Now I get an "inspection" every two years in California, and all they check is the smog. MAYBE they notice the tire tread, squeaky brakes, or steering when they drive it into the bay, but all they check is the smog equipment and tailpipe emissions.For all they would know, the headlights, horn, and turn signals might not work, and the car has a "speed wobble" at 45 mph. AFAIK, they don't even check EVs.
  • Not Tire shop mechanic tugging on my wheel after I complained of grinding noise didn’t catch that the ball joint was failing. Subsequently failed to prevent the catastrophic failure of the ball joint and separation of the steering knuckle from the car! I’ve never lived in a state that required annual inspection, but can’t say that having the requirement has any bearing on improving safety given my experience with mechanics…