DETROIT — General Motors on Friday announced it would inform about 1,100 dealers — or 18 percent of its 5,969 stores — that the automaker no longer “sees them as part of its dealer network on a long-term basis.”
“This process starts today, as GM begins contacting dealers regarding its long-term planning,” the company said in a statement.
GM said that, in most cases, existing franchise agreements run through October 2010.
The troubled automaker described the dealers being let go as “underperforming” and having “very small sales.”
“We have said from the beginning that our dealers are not a problem, but an asset for General Motors,” said Mark LaNeve, GM vice president of sales service and marketing, in a statement. “However it is imperative that a healthy, viable GM have a healthy, viable dealer body that cannot only survive but prosper during cyclical downturns. It is obvious that almost all parts of GM, including the dealer body, must get smaller and more efficient.”
What’s more, about 470 Saturn, Hummer and Saab dealers will soon be updated on the status of those brands. GM is trying to sell or wind down those brands.
“While additional cuts will be made, we believe the vast majority, over 90%, of the remaining dealers will be offered a chance to remain with GM,” the company said. “However, specific dealer issues, further attrition and additional possible dealer network actions are expected to bring the number of future GM dealers to around 3,600 by the end of 2010.”
GM said it would not release the names of any dealers being cut. “As independently owned businesses, dealer owners will make their own decisions if and when they want to make this information public,” the company said.
LaNeve added: “We are not terminating any dealerships today.”
AutoNation Inc., the country’s largest automotive retailer, said GM had notified it that six of its dealerships had been identified for possible closure. The company said the potentially impacted stores represent “zero percent” of AutoNation’s 2008 operating income.
“We believe GM’s consolidation plan is a difficult but positive step that will strengthen America’s dealer network and improve dealer profitability over the long term,” said Mike Jackson, AutoNation chairman and chief executive officer, in a statement.
The dealer reductions are part of GM’s plans to reorganize the company in an effort to make it viable in the long term. The company is staying afloat on $15.4 billion in federal government loans and needs another $11.6 billion to keep going.
It faces a June 1 deadline to restructure its debt outside of court or else go into bankruptcy, something GM CEO Fritz Henderson has said is more probable then not of occurring.