By on November 2, 2010

As Automotive News [sub] reports, GM has gone ahead and finalized the 500 dealer cuts that made up its bankruptcy-bailout-era dealer cull, despite resistance from some 22 members of the US House of Representatives. And despite the congressional pressure, a damning SIGTARP report, and an ongoing criminal investigation, GM hasn’t changed its tune about cutting dealers, telling AN [sub] that delaying dealer cuts

would only divert our collective attention at a critical time and would ignore the independent decisions of arbitrators and individual settlement agreements between GM and its dealers

Meanwhile, just what affect has the dealer cull had on surviving dealerships? Are they thriving? Well, not exactly…

Automotive News [sub] looks into the performance of surviving dealers, and finds a decidedly mixed bag.

At Flemington (N.J.) Chevrolet-Buick-GMC-Cadillac, General Manager Jeff Parker says service revenue is up 5 percent this year, in part because of referrals from a wind-down Chevrolet dealership 25 minutes away that closed in June…. Parker says that though his Flemington dealership has seen additional service work, he hasn’t seen an increase in new- and used-vehicle sales from the closing of Malek Chevrolet in Hopewell, N.J. He says he is concerned that those customers are looking at non-GM brands…

…Several GM dealers last week reported only a trickle of new business as a result of the wind-downs.On the other hand, some dealerships report a healthy increase in sales.

Of course, some dealers are seeing upticks in sales as a result of other dealer closures, but they tend to be in less-densely populated areas.

Bennett Motor Co., a Chevrolet-Buick store in Cheraw, S.C., has seen a 20 percent uptick in new- and used-car sales since its two largest GM competitors in rural Chesterfield County were wound down by GM, says General Manager Vic Gardner.

He expects his store will sell just over 100 new vehicles this year.

“We’re the only franchise Chevrolet dealer now in the entire county,” says Gardner, whose store is about 70 miles southeast of Charlotte, N.C.

Meanwhile, GM itself has admitted to the SIGTARP and congress that it expects no actual savings from its dealer cull. GM insists that fewer dealers is helping dealership profitability, but admits that improved products and an economic upswing is probably doing more. Meanwhile, GM’s overall sales are up only six percent compared to the ten percent increase enjoyed by the overall market. As long as GM’s sales underperform the market, culled dealers will question the wisdom of the sales channel blood-letting, but the real issue is the SIGTARP’s pending investigation. This story isn’t over by a long shot…

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18 Comments on “As GM’s Dealer Cull Wraps Up, Few Benefits Materialize...”

  • avatar

    GM can’t see the elephant in the room, the poorly handled and illegal bankruptcy destroyed their brand in the country for years to come. They forever alienated about half the country when all that happened and that half probably had more potential customers of theirs thna the half that wasn’t offended by the bailout. They are a zombie brand and combined with the utter cluelessness of management they will die eventually.

    • 0 avatar

      The bankruptcy wasn’t illegal.  We’ve addressed this time and time again.  It may have been politically and ideologically unpalatable, but it wasn’t illegal.
      If it were illegal, you’d have expected one of the wronged parties to sue and win by now.  But they haven’t, nor have they really tried.  That’s because it suits certain groups’ purposes to call it illegal (and reap PR benefits) without actually having to back up that assertion in a court of law.
      I do agree about alienating half the country, though I think that said alienation is short-sighted as bailing out GM and Chrysler probably did the “little guy” more good than ill.  The horrible part of that detail is that the half that was offended was also the half that was buying American-branded cars in larger numbers to start with. The people who don’t mind the bailouts are import buyers, generally speaking.

    • 0 avatar

      Bankruptcy law was not followed, the UAW was vaulted ahead of legitimate creditors and benefitted from the governemnt takeover. Whne the law was not followed it was illegal. You can talk around it all you want but the law was broken. If you can can’t or won’t understand that then you are incapable of reason. There is no shade of gray, just black and white, right and wrong in this whole affair.

    • 0 avatar

      Bankruptcy law was not followed

      Prove it.  You might not like how it went, but that doesn’t mean it wasn’t legal.

      There is no shade of gray, just black and white, right and wrong in this whole affair

      Yes, and you’re wrong. It is important to distinguish between things you find unpalatable from things that are illegal.

      Be very careful, too, about pulling the morality card. There are a lot of decisions made that are of questionable morality, but morality isn’t “right and wrong”, it’s a social convention that’s highly subject to whims of history and demography. There are a lot of things that, historically, were “right” or “wrong” which swapped places as society evolved. Laws are part of this; they’re a living document of what a society sees as right or wrong, and while you might not like them, and while you might want to (and can work to) having them changed, you can’t pretend they don’t exist, or say something that they don’t.

  • avatar

    Does anyone really expect dealers to report successful results from the dealer cull? Even a dealer that survived the cull is not going to be interested in reporting positive effects of the cull, lest dealer culls become perceived as a good business move.

  • avatar

    The dealer cull was necessary. A lot of dealers had shabby facilities because they were barely profitable or relied on service income. With the drop in sales GM experiences in 2008/2009 they would be even more tenuous. Now that the sales are shared by 500 fewer dealers it is self evident that each remaining dealer is getting some extra sales than they would have done. This helps the economies of scale.

    Some people may be alientated by the bali-out – although some money has been repaid and the Govt will likely lose little if any money over the medium term (say next 5 years). The bailout was initiated by President Bush and legally voted on. The alternative was much worse.

    Also Ford is culling dealers – so it isn`t just a bailout thing.

  • avatar

    It’s unrealistic to expect all of the benefits of the dealer cull to be realized so quickly. One of the reasons why the Big 3 so badly needed to cut their dealership networks was the surfeit of truly craptastic sales and service facilities that reflected badly on the brands. Think of brands that have a really strong retail image, like Lexus and Apple. They have limited, tightly controlled, and very well thought-out retail channels. GM, Ford, and Chrysler dealerships have been exactly the opposite of that. When you drive by some pathetic dealership with a scruffy little showroom, a tiny inventory, and a service area that you’d be afraid to entrust a lawnmower to, let alone a $30k car, it makes you think the whole brand is as backwards as the dealership. It will take a while to erase that image from the public’s minds, but it absolutely has to be done if the domestic companies are going to thrive in the marketplace.

  • avatar

    The evidence in the story is purely anecdotal, as if the writer had decided what story he wanted to write and gone out to find “facts” to support it.

  • avatar
    Mr Carpenter

    So, psarhjinian, if the bankruptcy wasn’t truly illegal, why don’t you tell that to the bondholders, who bought bonds in good faith? 

    Let’s say that you buy a bond to invest in a local company, under local law which gives you first priority if the company goes bust.  You’re taking the lesser risk than stockholders, but you also have less potential for profits if things go well. 

    Suddenly the Boss Hogg of the local area simply decides to walk over the local law and simply “declares” that his pals are going to be given first priority and you get stuck – along with stockholders – with essentially “nothing”. 

    Whether Boss Hogg thinks or claims he has done something legal or not, there is a larger legality of real morals which says “that’s just downright theft.” 

    The reason few people aren’t fighting “city hall” over this is because they are well aware that the outcome of the fight is rigged.  And there have been lawsuits, from what I have read, and guess what?  The outcome was rigged. 

    That is because we live in a fascist police state of the Untied Status of Amerika, and you don’t have to believe it but perhaps if you have an hour and a quarter you would be able to watch a video and try to fathom what is truly happening around you in what was a great country, once.

    • 0 avatar

      So, psarhjinian, if the bankruptcy wasn’t truly illegal, why don’t you tell that to the bondholders, who bought bonds in good faith?

      If you bought bonds in a company with serious cash and debt problems and you expected a return, let alone a return at par, you shouldn’t be investing because you don’t know how this stuff works.

      Sorry if that’s harsh, but it’s true.

      Bonds are not cash.  They are not redeemable at face value.  They are also not a guarantee that you’ll get anything as bondholders are well back in the queue, behind people who hold secured debt.  And brother, GM had a lot of secured debts: banks, funds and, surprise, surprise, the US and Canadian governments.

      Did I mention that GM went begging to the government for a loan, and that it offered itself up as security?  Remember Jet-gate?

      Had this been a “normal” bankruptcy, as you put it, the secured debtholders would have torn GM apart for whatever cash they had (which was nothing) and then gotten their debts paid through selling whatever of GM would be worth keeping which, again, wasn’t much.  Remember, GM had a lot of debt.

      The poor little bondholders would have gotten nothing, or at best pennies on the dollar.  The government actually did very well for them, offering them well above what they would have gotten had they been forced to wait in-line behind secured debtholders.  

      The only reason the bondholder and bankruptcy nonsense gets any play at all is because it dovetails perfectly with certain political interests.  The bondholders got greedy and played along, but once the whole situation came to the attention of the idiot libertarian movement it became yet another delusional, divorced-from-reality meme to scream about.

      Of course, it’s not true, and it’s not how the law works.

      You may not like, from ideological point of view, the government investing in industry.  You may not like the government acting as a secured debtholder in a bankruptcy.  But just because you don’t like it, and because you (and others) find it ideologically unpalatable, doesn’t mean it isn’t completely legal, and that it did begin not with Big Bad Government, but with Big Stupid Automakers begging for a loan.

      Look, I’m a socialist and a progressive and I don’t like government redistributing wealth in entirely the wrong direction any more than libertarians do (albeit for completely different reasons), but I also recognize when I’m being spoon-fed a line and, brother, the “poor l’il bondholders” is a long line.

      It’s been, what, nearly two years since we started discussing this? if the poor little bondholders had a legal leg to stand on, don’t you think they would have sued the government by now? I mean, if it’s so obviously illegal it should be easy, shouldn’t it? After all, we have suits against Toyota based on heresay. That they haven’t should tell you everything you need to know about how legal or illegal the bankruptcies were.

    • 0 avatar

      Oh great, another person who gets the facts interpreted for them by someone wearing a tinfoil hat and posting things on YouTube.

    • 0 avatar

      Amazing that amount of misinformation from internet lawyers that are out there.
      Psar is right yet again.  Maybe EN should do a piece on how the bankruptcy was actually legal.

    • 0 avatar
      John Horner

      “So, psarhjinian, if the bankruptcy wasn’t truly illegal, why don’t you tell that to the bondholders, who bought bonds in good faith? “
      The bonds in question where almost all held by vulture funds who bet that the government would pay them more than the open market valued the bonds at. Those bonds were bought at pennies on the dollar. When the gov’t wasn’t as generous as hoped the vulture funds were mad. Tough.

    • 0 avatar

      I’ll put in my opinion, as I’ve done before here, that the government did not follow the law in the bankruptcies of GM and Chrysler. But we can, and have, debated this here before. To no good end.

      For those who think the government followed a lawful process, I pose two issues:

      1) Where did the federal government get the right to turn over ownership rights in GM and Chrysler to the unions?

      2) Where did the federal government get the right to use funds Congress allocated to the Troubled Asset Relief Program to bail out the carmakers, when Congress voted against that very bailout?

      In both those cases, the federal government did things I think were not authorized by law, and therefore illegal.

  • avatar

    Just because BS is legal doesn’t mean that the people view it as right and fair, and public opinion, not lawyers, sells the cars.

  • avatar
    John Horner

    “Meanwhile, GM itself has admitted to the SIGTARP and congress that it expects no actual savings from its dealer cull.”
    Told ya so way back when. The only real result is that GM is now selling fewer vehicles than it would with a more robust dealer network.

  • avatar

    Toyota has 1/2 the dealer density that GM does, and they have no trouble selling or servicing cars.  I’m totally unsympathetic to any efforts to stop GM from culling dealerships.

  • avatar

    If you follow the flawed logic of industrial/environmental planning, you would advocate that the GM/US govt open new GM dealerships in low income neighborhoods with heavy emphasis on Volt sales.

    If think that’s silly as low income people don’t buy new cars let alone high tech electro cars, then you see the folly of ‘build it, mandate it and sales will come’ policies.

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