GM, Chrysler to drop 1,900 dealers by end of 2010
Sunday, 17 May 2009
NEW YORK, May 16 (AP): A decision by troubled automaker General Motors to drop 20 per cent of its dealers is due in part to an oversized network that created stiff internal competition and gave shoppers too much leverage to talk down sticker prices, hurting chances for future sales.
GM's announcement Friday is more bad economic news for dealers, communities and businesses still reeling from Chrysler's similar nationwide dealer cuts a day earlier. Both automakers are scrambling to reorganize and stay alive in a severe recession that has devastated sales of cars and trucks.
Several hundred of the roughly 1,100 GM dealers already knew they were headed for closure, but most of them learned for the first time Friday. The dealerships will be eliminated when their contracts end late next year.
"We're 98 years old. We're two years from a hundred, and I don't want to go out at 99 years," said Alan Bigelow, whose family runs a Cleveland-area Chevrolet dealer that learned it was on GM's hit list.
Including Chrysler's decision Thursday to eliminate a quarter of its own, about 1,900 dealerships learned in a matter of 48 hours that they would be forced either to sell fewer brands or close altogether.
The National Automobile Dealers Association, an industry group, says the GM and Chrysler cuts combined could wipe out 100,000 jobs.
Chrysler LLC is already in bankruptcy protection, and industry analysts say General Motors Corp. is making its cuts now in preparation for a bankruptcy filing June 1. The company says it would prefer to restructure out of court.
GM declined to reveal which dealers will be eliminated. Many dealers vowed to fight, first through a 30-day company appeal process, then possibly in court.
GM's dealers are protected by state franchise laws, and the company concedes it would be easier to cut them if it were operating under federal bankruptcy protection. GM says it's trying to restructure outside of bankruptcy because of the stigma of Chapter 11.
Chrysler dealers have fewer options because the company has already filed for bankruptcy protection, and federal bankruptcy judges generally trump state law. And Chrysler said on Thursday that its cuts were final.
GM's announcement Friday is more bad economic news for dealers, communities and businesses still reeling from Chrysler's similar nationwide dealer cuts a day earlier. Both automakers are scrambling to reorganize and stay alive in a severe recession that has devastated sales of cars and trucks.
Several hundred of the roughly 1,100 GM dealers already knew they were headed for closure, but most of them learned for the first time Friday. The dealerships will be eliminated when their contracts end late next year.
"We're 98 years old. We're two years from a hundred, and I don't want to go out at 99 years," said Alan Bigelow, whose family runs a Cleveland-area Chevrolet dealer that learned it was on GM's hit list.
Including Chrysler's decision Thursday to eliminate a quarter of its own, about 1,900 dealerships learned in a matter of 48 hours that they would be forced either to sell fewer brands or close altogether.
The National Automobile Dealers Association, an industry group, says the GM and Chrysler cuts combined could wipe out 100,000 jobs.
Chrysler LLC is already in bankruptcy protection, and industry analysts say General Motors Corp. is making its cuts now in preparation for a bankruptcy filing June 1. The company says it would prefer to restructure out of court.
GM declined to reveal which dealers will be eliminated. Many dealers vowed to fight, first through a 30-day company appeal process, then possibly in court.
GM's dealers are protected by state franchise laws, and the company concedes it would be easier to cut them if it were operating under federal bankruptcy protection. GM says it's trying to restructure outside of bankruptcy because of the stigma of Chapter 11.
Chrysler dealers have fewer options because the company has already filed for bankruptcy protection, and federal bankruptcy judges generally trump state law. And Chrysler said on Thursday that its cuts were final.