GM Reinstates 661 Culled Dealers

by Paul Niedermeyer

March 5th, 2010 7:25 PM

Apparently eager to avoid uncertainties of the Congressional-mandated arbitration, GM announced that 661 of its 1,160 terminated dealers that sought arbitration would be back in business pronto. Automotive News quotes GM North America President Mark Reuss: We are eager to restore relationships with our dealers, and get back to doing what we do best — selling cars and taking care of customers,” “The arbitration process creates uncertainty in the market. We believe issuing these Letters of Intent is good for our customers, our dealers and GM.”

Dealer privileges were to be restored immediately, and GM was standing by ready to take their orders, especially for Cadillacs. Of these 19 marked for possible settlements of one particular attorney representing a group of dealers, 10 are Cadillac dealers. It’s felt in some quarters that Cadillac’s recent sales disappointment may be in part due to the reduced dealer force. Reuss has said that good dealer relations are among his top priorities this year. He gained direct responsibility for U.S. sales in a management shakeup announced Tuesday.

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50merc on Mar 05, 2010

For the life of me I can't understand why Coca-Cola doesn't learn from GM. I go into a convenience store, it sells Coke. I stop at a gas station, it sells Coke. I eat at a restaurant, it too sells Coke! Seems like I see Coca-cola everywhere! How the heck is Coke going to keep its market share up unless it pares back the number of outlets where the stuff is sold? Make people drive thirty miles to buy a soda and you can bet they'll appreciate it a lot more! And to make matters worse, it's not at all unusual to see a convenience store, gas station or restaurant go out of business. We all know who's to blame! No doubt about it, there are way too many places selling Coke.

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- CarShark on Mar 06, 2010
  
  I don't see how that analogy works at all with two products so vastly different.
  
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- Dynamic88 on Mar 06, 2010
  
  @50Merc If you're trying to imply that there is a direct relationship between number of dealers and total sales, history is not on your side. There are fewer dealers now than in 1949 - not just fewer per capita, which is also true, but fewer total dealers. Most of the attrition has not been recent - it's been ongoing since '49. The truth is that since '49 more and more cars are sold each year by fewer and fewer dealers. 1949 was the high water mark for number of dealers in the US (some sources say 1950). Ever since then, there have been fewer dealers, and this has been true even while the population has risen, and the number of cars per household has increased. There is simply no reality to the idea that more dealers are needed to drive sales. We've witnessed exactly the opposite - more sales from fewer dealers- for 60 years now.
  
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- Don1967 on Mar 06, 2010
  
  Coca Cola is a hugely profitable enterprise which dominates its market, and whose products command a premium price even in recessionary times. The dividend on its stock was just increased for the 47th year in a row. I don't see how any of this is analogous to a car company which runs on government fumes.
  
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50merc on Mar 06, 2010

Mainly I was trying to get people to think for themselves about the wisdom of the dealer cull. I mentioned Coca-Cola because it works very hard to make Coke available wherever one might go. GM, in contrast, decided to make their products harder to get. It appears most of the culled dealers were in smaller markets. I want to know exactly how a little Buick dealer located in, say, a small city an hour or more from a big city, and that sells, oh, 40 cars a year is harmful to GM. Heck, the American public owns 60% of GM. Open up the books! (At least the method for allocating overhead.) It is also said that the culled dealers were hurting other dealers. Again, I want to know exactly how. But even if we accept that there was too much competition for customers (yeah, customers hate that) why not just let the weakest die naturally? The dealer cull was mostly involuntary. I doubt that those dealerships were hanging on to an unprofitable franchise just in the hope that someday GM would buy it out.

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- Dynamic88 on Mar 06, 2010
  
  You have a point about them dying off naturally vs being culled. But to put the cull in perspective, between GM and Chrysler there were roughly 2000 culled dealers. Since '49 several times that many dealers have dried up and blown away through "natural selection". The same period -1949 to now - has mostly been characterized by increasing car sales. The yearly charts would be up and down, but the long term trend line is higher sales. The explosion of car sales in the last half of the 20th century coincides with the loss of thousands of dealers over the same period. Thus, there is simply no relationship between number of dealers and total sales. In fact, record sales have been set by a smaller dealer network. When you say GM made products harder to get, you have to stop and consider the context. Sure, in a small town, an hour from a big city, the cars are harder to get. Yet people from other small towns where there is no dealer get cars, and realistically people keep a car several years, so a 30 mile trip isn't that great a hardship. It's one thing to drive 30 miles for a bottle of Coke, another thing to drive 30 miles for a car once every 7 years. In a different context, I still have 5 places within 10 miles to buy a Chevrolet. Do I really need that many choices? In reality, GM didn't kill enough dealers. Your other questions have been answered countless times here on TTAC.
  
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- Christy Garwood on Mar 06, 2010
  
  Dynamic88, your last sentence urges me to say that IMO the discussion about the dealer cull is getting tedious on this site. CEO Ed Whitacre has stated publicly that he expects positive results for GM and as such GM employees and dealers will be held accountable to achieve those results. Just guessing here, but maybe Whitacre looked at this arbitration process and said, okay, if a dealer wants a shot at selling cars and trucks, have at it. If they don't succeed, they will close anyway.
  
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- Crash sled on Mar 06, 2010
  
  Who cares what Whitacre says? Who cares what the head of the US Postal Service says? Who even knows who either of these guys is? All we know is that they're government employees, doing something that the private sector can do cheaper, better and faster than they are. And these dealerships are exactly like Post Office branches, which politicians fight to keep and build in their districts. It's always a plum to have a post office in your community. Who cares if the USPS loses billions? It means labor union jobs and campaign contributions and payoffs... and that's what counts. Government Motors now resembles the Post Office. Wonderful.
  
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Daga on Mar 06, 2010

I can't even imagine the boatloads of cash the congresmen running for reelection in the fall are going to bring in from car dealers and every local business with low traditional buyer power. Ahhh, democracy!

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AJ on Mar 07, 2010

Good luck getting their customers back.

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