Area dealers appear to have survived GM cuts

Saturday, May 16, 2009
FILE - In this Dec. 12, 2008 file photo, the General Motors logo is seen outside the GM headquarters in downtown Detroit. General Motors Corp. dealers across the nation are awaiting word from the company on whether they will be fired. GM says it will notify 1,100 U.S. dealers on Friday May 15, 2009 that their franchise agreements will not be renewed. (AP Photo/Carlos Osorio, File)

NEW YORK -- A day after Chrysler LLC said it was cutting 800 dealerships, General Motors Corp. on Friday told about 1,100 of its U.S. dealers their franchises will be terminated late next year.

A number of dealerships in the area had yet to receive notification Friday: Brennecke Chevrolet in Jackson, Coad Chevrolet in Cape Girardeau, VanMatre Buick Pontiac GMC Cadillac in Cape Girardeau, Crown Chevrolet in Marble Hill, Mo., Keller Motors in Perryville, Mo., Autry Morlan in Sikeston, Mo., Morlan Chevrolet in Dexter, Mo., Coad Chevrolet Pontiac Buick Cadillac in Anna, Ill., Cash's Baker Chevrolet Cadillac in Marion, Ill., Vic Koenig Chevrolet in Carbondale, Ill., Barrett-Jensen Chevrolet Oldsmobile in Fredericktown, Mo., Ron Ward Chevrolet in Herrin, Ill., and Foley-Sweitzer Motor Sales in Marion. The dealerships said they assumed they had survived the first round of cuts.

In a comment left on the Southeast Missourian website, semissourian.com, Mark VanMatre said: "No letter from GM was recieved by VanMatre Buick Pontiac GMC

Cadillac regarding dealership closings. We have met all of GM's Standards for Excellence for 2009. Since merging Buick Pontiac GMC and Cadillac are channeled exactly as GM would like ... We are what GM wants as they go forward."

GM said the move targets "underperforming" dealers with small sales volumes and markets in which they are not competitive.

"Dealers are not a problem to GM; they're an asset to GM. Too many dealers, in actuality, are a problem," said Mark LaNeve, GM's vice president of North American sales and marketing, in a conference call with reporters.

The company did not disclose the dealers it plans to eliminate and left it up to dealerships to reveal if their franchises will not be renewed.

The cuts are part of a larger GM plan to drop 2,600 of its 6,200 dealerships as the automaker tries to restructure to become profitable again. The moves likely will cause the loss of thousands of jobs and governments will lose untold dollars in tax revenue as dealerships are forced to close.

Besides the 1,100 dealership cuts, the company will provide updates to about 470 Saturn, Hummer and Saab dealerships on the status of those brands, which it plans to sell.

Friday's cuts will not be the last. GM said it expects to lose more dealers through attrition. Ultimately, about 90 percent of the remaining dealerships will stay with GM, the company said.

FedEx letters bearing the news began arriving Friday morning at GM dealers around the U.S. The letters state that dealers were judged on sales, customer service scores, location, condition of facilities and other criteria.

"No news is good news," said Terry Wibbenmeyer, general manager of Keller Motors.

Crown Chevrolet sales and finance manager Brandon Long was cautiously optimistic.

"I believe Chevy is a great brand, and I hope they'll take notice of that when deciding our fate," Long said. "All we can do is hope for the best."

Long said that if General Motors decides to terminate Crown's franchise, it could become a used-car dealership.

Not celebrating

Even though his three dealerships did not receive a letter, Tim Coad said it is not a cause for celebration.

"I don't know how it will transpire," said Coad, who owns Brennecke Chevrolet, Coad Chevrolet and Coad Chevrolet Pontiac Buick Cadillac. "If you don't get a letter, what will you do?

"You don't need to get too happy because the letter could still come later," he said. "It's not good

for morale."

Coad believes the primary problem is those making decisions at General Motors' headquarters. He said he failed to see the advantage in closing dealerships in efforts to become profitable again.

"We've worked under their direction for years and the dealers themselves are making money," Coad said. "But now because of their mistakes we've become a part of the problem.

"GM and the federal government got sloppy," Coad said. "By closing the dealerships they'll sell less cars. It's the MBA brains making the decisions. The mentality is, I can push in and out of here in a few years and collect my pension."

Both Chrysler and GM say they are cutting the number of dealers because they have too many outlets that are too close to each other, and the competition drives down prices. But as the ranks of dealers thin and competition decreases, that likely will mean higher prices for car and truck buyers.

As GM and Chrysler lost market share to Japanese and other overseas brands, the automakers, as well as Ford Motor Co., ended up with too many dealerships. Many are barely getting by and can't afford to upgrade their facilities or hire the best personnel to compete with the Japanese, who have far fewer dealerships.

With fewer dealers, consumers won't see as much competition, said Aaron Bragman, an automotive industry analyst with the consulting firm IHS Global Insight.

"No longer will people be able to shop between three or four dealers within 15 minutes of each other for the best cutthroat price," he said.

GM knows it will lose sales in the short-term, but over the long haul, fewer dealers will mean higher per-vehicle profits, Bragman said.

"As the dealers go, so goes the company in terms of financial health," he said.

In the 1980s, GM, Chrysler and Ford controlled more than 75 percent of U.S. sales, but that dropped to 48 percent last year. GM alone held nearly 51 percent of the market in 1962, but only 22 percent last year.

Bragman said GM likely will go into bankruptcy protection on June 1, but it's starting to negotiate deals ahead of the filing to speed up the Chapter 11 process.

"GM has been ... acting as if they are negotiating a prepackaged bankruptcy," he said.

Staff writer Brian Blackwell contributed to this report.

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