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Apparently eager to avoid uncertainties of the Congressional-mandated arbitration, GM announced that 661 of its 1,160 terminated dealers that sought arbitration would be back in business pronto. Automotive News quotes GM North America President Mark Reuss: We are eager to restore relationships with our dealers, and get back to doing what we do best — selling cars and taking care of customers,” “The arbitration process creates uncertainty in the market. We believe issuing these Letters of Intent is good for our customers, our dealers and GM.”
Dealer privileges were to be restored immediately, and GM was standing by ready to take their orders, especially for Cadillacs. Of these 19 marked for possible settlements of one particular attorney representing a group of dealers, 10 are Cadillac dealers. It’s felt in some quarters that Cadillac’s recent sales disappointment may be in part due to the reduced dealer force. Reuss has said that good dealer relations are among his top priorities this year. He gained direct responsibility for U.S. sales in a management shakeup announced Tuesday.
34 Comments on “GM Reinstates 661 Culled Dealers...”
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So what was the freaking point of all this? Can we see a break down by congressional district of which dealers were saved?
What a damn shame. GM has way too many dealers. The cull wasn’t extensive enough to begin with, never mind reinstating half of them.
Oh well, who needs to downsize from the days of 50% market share anyway?
They should be CUTTING more dealers. What’s next, reinstating Pontiac and Rick Wagoner?
With everything that GM was suppose to do due to bankruptcy, how much have they actually done, how much have they flip/flopped on, and how much have they weaseled out of?
Was it even worth it?
They are headed right back to where they started, and with gas prices still lowish and more people starting to buy trucks and SUVs again, history might just repeat its self and a lot sooner this time. It looks like nothing was learned and nothing has changed. The next thing you know they will be refreshing the Hummer lineup!
turbobeetle, why do you say GM “weaseled out of” the dealer cull? Search this site back through August 2009 and find where dealers lobbied congressional representatives who in turn asked GM to provide more details on the cull criteria. Farago has a post with a .pdf file from GM that shows how GM saves structural costs by having fewer dealers.
As 2009 rolled to the end, congress set up an arbitration process for culled dealers to use to try to stay open. IMO, GM hasn’t weaseled out of any agreements.
Nothing like a giant step backwards! Although perhaps they didn’t cull the right dealers? I know the Caddy dealer in my area was a shock, the alternatives are too far away, and the area is pretty affluent, and already has a huge dealer presence of EVERY maker…..except Cadillac.
Less here than meets the eye.
Within 60 days, zombie dealers will need to document working capital and floorplan financing details acceptable to GM. Wanna bet that a significant number won’t be able to secure the money? Does GMAC have to floor them regardless of credit risk?
Then GM can tell their Congressional Overlords that they tried but the dealers were just too weak to be part of New GM (without another huge bailout if you wish)
More shenanigans from the masters at GM.
I think you missed the part where the dealers can choose between settlement cash or the franchise.
I wonder if there will now be an asterisk in the bankruptcy code that says auto dealer contracts are a sancrosanct new class of creditor, above secured debt…
Maybe they should reinstate all 1160 dealers, and then add another 1160. That way they can make up their losses with volume, right?
More foolhardiness, but this time I place the blame at the feet of our elected officials (mostly), and GM for caving.
Comrades, this strategy plays in nicely with the decimation of Toyota by the same gov’t that owns GM. Vodka shots for all “taxpayers” as GM (aka Gov’t Motors) is surely going to need all these dealers once Toyota is run out of town. All taxpaying citizens will have no choice but to buy GM once this political strategy is fully executed.
USSA indeed.
Gee. Hmmm. ….and we wonder why we find the recent Korea article voicing concern over Toyota and the Gov’t hunt and kill strategy being played out…..
Also….go look up the facts on who the top political campaign donors have been over the past decade. Any one care to dispute that in fact it is the unions?
Always follow the money trail……always
Please give us fair warning if you plan any cross country trips to ‘visit’ some government office in the next while, m’kay?
Where’s the list of dealers that are risen from the dead?
Reinstating Pontiac is a great idea… maybe bringing it back will help them to regain market share; with a properly executed line up, that is. Reviving the Firebird would reinvigorate sales of GM’s muscle car segment once everyone has a Camaro. I’ll buy one!
Dear GM,
OK, there were too many of us. I know my dealership didn’t sell a lot of cars, but hey, those damn customers just don’t know what they’re missing.
Anyway, after closing the doors in a hurry, firing all the staff and emptying out the back room, I stiffed my landlord, and declared BK on the whole shootin’ match.
So, just send me one of those government checks with a whole lotta zeros on it, and we’ll be back in business!
With Toyota out of the way, we’ll be right back to 50% in no time!
Come on. Stop the whimpering. What happened to our good old fashioned can-do American spirit?! You wanted us to save GM, didn’t you? Well alright then, we’re saving GM. All of it. Every last bit, so you can have it forever. So relax.
Wait, didn’t GM go through a bankruptcy? Aren’t they a new legal entity now? Doesn’t this render the franchise contracts with Motors Liquidation Corp. functionally useless?
I was under the impression that the culled dealers hadn’t a leg to stand on. Heck, aren’t most dealers Republican anyways?
What part of this am I not understanding?
“What part of this am I not understanding?”
That the law only applies when the people who execute the law want it to.
The GM BK in and of itself, went outside established BK law in several ways. Who you gonna argue with? The courts?
So, if you have the money to lobby the legislators that (semi-indirectly) run GM now, do you honestly believe the rule of law applies?
@psar: I’m with you, on this one. I thought the BK would set the culled dealers loose…
For the conspiracy theorists on this site: If this is the same government that’s allegedly hounding Toyota out of the country to benefit GM, how does reinstating these dealers HELP GM?
It is easy to find the history of the GM dealer cull and supporting documents on this site. Check it out to refresh your memories.
FWIW, my summary: Winddown contracts are with New GM Co. Dealers lobbied US Congressional Reps to stay open even though it increases GM structural costs. US congress set up an arbitration process between Chrysler and GM and their dealers.
Personally, I don’t know how this helps GM even though I work there. Just guessing and using logic, winddown agreements cost $X and keeping a dealer open costs $Y. If X > Y, then keep the dealer open.
Christy Garwood: I assume that they figured that they would lose many for whatever reason and they wanted to use the leverage while they still had it to get these 661 to sign up to some kind of IMF-style viability metrics.
Write this down. Mark Reuss is the right man, in the right place, at the right time. GM has shed its debt and will repay taxpayers. The ecomomy will recover and the general will be printing money like never seen before. Overtime Reuss will be regarded in the same conversations as Sloan-Iacocca-York-Perot and Mulally. Reuss now has the dealer body on his side. The perception gap of GM’s lack of quality is already diminishing. Wonder what a late model Toyota or Lexus is worth today compared to 2 months ago. It’s all about perception. Furthermore, as these culled dealers restock inventories it will create many jobs for people right here in the US. How wonderful is that.
…Anyone else waiting for the punchline?
that sounds suspiciously similar to the phrasing the freep reported that Ruess said “This is the right number, with the right performance with the right people,”.
Mark, if that’s you posting, that is one of the lamest attempts at buzz creating I’ve ever heard of. Either that or you’re drunk-posting, in which case you’re awesome and get a pass.
daga…..do you only read through posts and make stupid comments about other people thoughts. Or do you actually have any your own. I am not Mark Reuss, just a guy trying to break par.
For the life of me I can’t understand why Coca-Cola doesn’t learn from GM. I go into a convenience store, it sells Coke. I stop at a gas station, it sells Coke. I eat at a restaurant, it too sells Coke! Seems like I see Coca-cola everywhere! How the heck is Coke going to keep its market share up unless it pares back the number of outlets where the stuff is sold? Make people drive thirty miles to buy a soda and you can bet they’ll appreciate it a lot more! And to make matters worse, it’s not at all unusual to see a convenience store, gas station or restaurant go out of business. We all know who’s to blame! No doubt about it, there are way too many places selling Coke.
I don’t see how that analogy works at all with two products so vastly different.
@50Merc
If you’re trying to imply that there is a direct relationship between number of dealers and total sales, history is not on your side.
There are fewer dealers now than in 1949 – not just fewer per capita, which is also true, but fewer total dealers. Most of the attrition has not been recent – it’s been ongoing since ’49.
The truth is that since ’49 more and more cars are sold each year by fewer and fewer dealers. 1949 was the high water mark for number of dealers in the US (some sources say 1950). Ever since then, there have been fewer dealers, and this has been true even while the population has risen, and the number of cars per household has increased.
There is simply no reality to the idea that more dealers are needed to drive sales. We’ve witnessed exactly the opposite – more sales from fewer dealers- for 60 years now.
Coca Cola is a hugely profitable enterprise which dominates its market, and whose products command a premium price even in recessionary times. The dividend on its stock was just increased for the 47th year in a row. I don’t see how any of this is analogous to a car company which runs on government fumes.
Mainly I was trying to get people to think for themselves about the wisdom of the dealer cull. I mentioned Coca-Cola because it works very hard to make Coke available wherever one might go. GM, in contrast, decided to make their products harder to get. It appears most of the culled dealers were in smaller markets. I want to know exactly how a little Buick dealer located in, say, a small city an hour or more from a big city, and that sells, oh, 40 cars a year is harmful to GM. Heck, the American public owns 60% of GM. Open up the books! (At least the method for allocating overhead.)
It is also said that the culled dealers were hurting other dealers. Again, I want to know exactly how. But even if we accept that there was too much competition for customers (yeah, customers hate that) why not just let the weakest die naturally? The dealer cull was mostly involuntary. I doubt that those dealerships were hanging on to an unprofitable franchise just in the hope that someday GM would buy it out.
You have a point about them dying off naturally vs being culled.
But to put the cull in perspective, between GM and Chrysler there were roughly 2000 culled dealers.
Since ’49 several times that many dealers have dried up and blown away through “natural selection”. The same period -1949 to now – has mostly been characterized by increasing car sales. The yearly charts would be up and down, but the long term trend line is higher sales.
The explosion of car sales in the last half of the 20th century coincides with the loss of thousands of dealers over the same period. Thus, there is simply no relationship between number of dealers and total sales. In fact, record sales have been set by a smaller dealer network.
When you say GM made products harder to get, you have to stop and consider the context. Sure, in a small town, an hour from a big city, the cars are harder to get. Yet people from other small towns where there is no dealer get cars, and realistically people keep a car several years, so a 30 mile trip isn’t that great a hardship. It’s one thing to drive 30 miles for a bottle of Coke, another thing to drive 30 miles for a car once every 7 years.
In a different context, I still have 5 places within 10 miles to buy a Chevrolet. Do I really need that many choices? In reality, GM didn’t kill enough dealers.
Your other questions have been answered countless times here on TTAC.
Dynamic88, your last sentence urges me to say that IMO the discussion about the dealer cull is getting tedious on this site.
CEO Ed Whitacre has stated publicly that he expects positive results for GM and as such GM employees and dealers will be held accountable to achieve those results. Just guessing here, but maybe Whitacre looked at this arbitration process and said, okay, if a dealer wants a shot at selling cars and trucks, have at it. If they don’t succeed, they will close anyway.
Who cares what Whitacre says? Who cares what the head of the US Postal Service says? Who even knows who either of these guys is?
All we know is that they’re government employees, doing something that the private sector can do cheaper, better and faster than they are.
And these dealerships are exactly like Post Office branches, which politicians fight to keep and build in their districts. It’s always a plum to have a post office in your community. Who cares if the USPS loses billions? It means labor union jobs and campaign contributions and payoffs… and that’s what counts.
Government Motors now resembles the Post Office. Wonderful.
I can’t even imagine the boatloads of cash the congresmen running for reelection in the fall are going to bring in from car dealers and every local business with low traditional buyer power. Ahhh, democracy!
Good luck getting their customers back.