Feds Set to Pay Billions to Axed GM and Chrysler Dealers

Robert Farago
by Robert Farago

As our previous story on New GM’s dealer oath indicated, New Chrysler and Government Motors are fighting a desperate battle to head-off H.R. 2743. The bill—which has cleared committee and continues to gather steam amongst the axed dealers’ political allies— would require the former bankrupts to take back thousands of terminated franchisees. “We’re open to a non-legislative solution,” Chrysler spinmeister John Bozzella told Automotive News [sub]. “We’re interested in a non-legislative solution,” GM spokesman Greg Martin echoed in an e-mail. Although the automakers’ media mates are happy to parrot the euphemism, let’s call this for what it is: a pay-off. Price tag? The two automakers sliced 2,789 dealerships. Even if you figure a paltry $1 million each, that’s a $2.789 billion fate-thee-well. Compared to the $70 billion to $100 billion-plus that Uncle Sam’s plowed into the zombie automakers, it’s a pittance. But the actual retail price of the showcase is likely to be . . . much more. Watch this space.

Robert Farago
Robert Farago

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  • SCE to AUX SCE to AUX on Jul 16, 2009

    There seems to be agreement that some dealers need to be axed. But no dealer will admit they are an appropriate candidate. I assume C/GM aren't stupid enough to axe dealers that are profitable to the mothership and have therefore selected the biggest losers to walk the plank. And sooner rather than later - bankruptcy demands swiftness, sort of like a triage center in a hospital - you can't wait for some wounds to heal on their own. The Plan is severely undermined when local politicians can muster enough whining power to say that their dealerships are the wrong ones to go. Will we see this next with the factories and suppliers? If so, what is left to distinguish the new GM from old GM?

  • At40 At40 on Jul 16, 2009

    The offers on the windown agreement are pennies to the dollar. Even if you got the most possible $ 1 million it pales in comparison to the investment of parts, tools, and real estate. Notice I didn't say inventory because GM was kind enough to let us sell the units retail. Give us a normal termination or leave us alone. That is the only acceoptable terms

  • U mad scientist U mad scientist on Jul 16, 2009
    Even if you got the most possible $ 1 million it pales in comparison to the investment of parts, tools, and real estate. And what is that investment making now? Oh that's right, not much. All the physical assets are still yours. If they're not worth anything for starting a service shop or whatever, then that's only more evidence of the worthlessness of the business. The current offer is the legit legal consequence of BK, the dealers are essentially looking to change the law to get more taxpayer $, and for a dealer going away anyway, I can guarantee it's not going to the employees.
  • PHYL46 PHYL46 on Jul 17, 2009

    gslippy Let me give you some real facts about how stupid GM is when it comes to closing dealerships. I know from first hand esperience that they have sent "wind-down" letters to profitable dealerships in my area and if it is happining here then it is happening all over the country. 1) the dealership in my area that is slated to close has extremely high customer service satisfaction numbers, and I thought that is what the "New GM" was going to be all about "Customer Satisfaction". 2) They are consistently in the top 100 of dealerships for new car sales volume in the country for their car line. And while the nationwide average for new car sales at GM dealers are down 38 % my area dealers sales are only down 19 % switch shows a high degree of customer loyalty (isn't that what GM is looking for?). 3) This dealership has been rated profitable and well-capitalized by national organizations. So don't tell me that these dealership closings aren't political or that GM isn't stupid. Why else would they close dealerships that are making the parent company money? As my grandmother used to say "that would be like cutting off your nose to spite your face".