GM sheds 1,100 dealers
General Motors Corp. on Friday notified 1,124 of its dealers that it would not renew their franchise contracts, effectively eliminating nearly 20 percent of its distribution network.
The news, delivered in express mail letters and phone calls to Chevrolet, Buick, Pontiac, GMC and Cadillac dealers, comes a day after Chrysler used bankruptcy court to break the contracts with 789 of its nearly 3,200 dealers.
Separately, Chrysler said Friday that it was telling its parts suppliers whether they could continue to have working relationships with the company. The company sent letters to 1,200 suppliers it intended to keep but did not say how many would be cast aside.
The National Automobile Dealers Association said it estimated that 101,000 jobs could be lost between the GM and Chrysler dealership cuts. Thousands more could be lost from suppliers that go bankrupt from lost business to Chrysler.
GM said the moves were a painful but necessary step.
"It is imperative that a healthy, viable GM have a healthy, viable dealer body that cannot only survive but prosper during cyclical downturns," said Mark LaNeve, GM's head of sales, service and marketing. "It is obvious that almost all parts of GM, including the dealer body, must get smaller and more efficient."
LaNeve said the cuts focused on dealers selling small numbers of vehicles or those with below par sales, customer service or financial performance. Nearly 500 of the dealers singled out Friday sold 35 or fewer vehicles a year, he said.
This was probably the first of several rounds of cuts, and LaNeve said that about another 450 dealers — mainly those that also have franchises for non-GM brands — soon could receive similar notices in coming weeks. GM, which had about 6,000 dealers before Friday's cuts, has a goal of reaching 3,600 dealers by the end of 2010.
In its latest restructuring plan, submitted last month, GM said it would cull 2,600 of its then-6,200 dealers by late 2010 as it attempts to return to viability and avoid bankruptcy. According to LaNeve, more than 200 of those dealers have closed on their own volition due to weak market conditions, leaving GM with 5,969 dealers as of Friday, including the 1,100 being notified.