GM And Chrysler To Shut Hundreds Of Dealerships

[babylonsister]

GM, Chrysler to Thin Dealer Ranks as U.S. Gives Aid (Update1)

By Greg Bensinger


Dec. 29 (Bloomberg) -- General Motors Corp. and Chrysler LLC are due to get $4 billion each in U.S. loans today to keep them from running out of cash. They’re still looking for help with one of their biggest challenges.

A U.S. dealership glut is damping the retailers’ profits, crimping spending on marketing, facilities and vehicles, GM and Chrysler say. GM set a goal of closing 1,750 showrooms, or 27 percent, over four years while Chrysler said it wants to thin its 3,300 dealerships, without setting a target.

Franchise laws and possible legal action by dealers may make it difficult to achieve the cuts, which were a pillar of the survival plans the automakers gave Congress on Dec. 2. GM had to spend more than $1 billion on its 2000 plan to shut its Oldsmobile unit, in part due to lawsuits over forced closures.

“In a number of states there’s these very elaborate procedures that you have to go through to shut dealerships,” University of Chicago law professor Douglas Baird said in an interview. “In some states you just can’t do it at all.”


more...

http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=aG8fuBmOF0AY

[K Gardner]

1. Here we go...

[RB TexLa]

2. In some states you just can’t do it at all

If they want to put a dealership out of business they can, it's just a matter of how nicely they want to go about it.

[tammywammy]

3. There are only a few reasons GM can pull the Sales & Service Agreement

And dealers can force GM into court to make GM prove the dealer violated the agreement.

[RB TexLa]

4. All they have to do is go to the mafia mentality for payments due

Just say "fuck you, pay me," and mean it.

[tammywammy]

5. Not really

GM's Sales & Service Agreement is very explicit in what a dealer is expected to do and when.

It'll be costly to GM, I assume they'll just try to buy out dealers. But if they yank the S&S then dealers retain the right to go into court and force GM to prove they violated the agreement.

[RB TexLa]

6. Yes but it's easy for things to get lost and delayed and lost again

as the automaker can say, sorry, something must have happened in another department we'll find out where your shipment of cars is and get back to you in 4 to 3 business days to let you know how we can get them to you.

[tammywammy]

7. Again, then dealers can sue GM for violating the agreement

It's a two edged sword. No matter what, to shut these dealers down, it'll be costly to GM.

[RB TexLa]

9. filing a lawsuit especially if the other party works to delay any kind of adjudication

doesn't guarantee a business survives.

especially if things are continuing to get lost and delayed during the lawsuit. Like I said it depends on how nicely they want to go about getting rid of them.

I have a feeling once dealerships know the company is trying to run them out of business they would want to cut their losses and get out instead of fighting them.

[tammywammy]

10. Sure, they may shut the dealer down

But GM will pay a lot for doing it that way.

And no, I doubt most dealers will cut their losses, since most states have franchise laws that are on the dealers side. Dealers will close, but it'll cost GM a lot to get them to close.

[TexasObserver]

14. But GM can litigate those shut downs for several years.

Either things will get better, and they can reopen some of them, or things will get worse, and GM will end up in bankruptcy, where they can eliminate dealerships in a reorganization.

The dealership owners will have legal rights they can try to enforce, but it's a long haul and will cost them a lot of money to litigate it, with no guarantee they'll ever see a dime for their trouble.

[tammywammy]

15. That's why I assume GM will try to buy out dealers first

But there will be some litigation over this.

[anigbrowl]

19. Maybe, maybe not. Most business agreements contain a clause for force majeure

And govt. credit conditional on bottom line repair may qualify.

[Phred42]

8. Maybe an opportunity for the Independant shops

...after the shake out

:shrug:


But they are driving another nail in to their own coffin. I've owned 3 Jeeps since 1991 - I wouldn't take a chance on another one now - even if I had a job and could afford one.

[csziggy]

11. The GMC-Cadillac-Hummer dealership here closed last year

Absolutely no warning at all. One day they were open, two days later the lot was locked up, a week later all the cars were gone and the location was up for sale. Though there was a sign indicating a pending sale in September that was gone by Christmas and I think it will sit empty for a long, long time.

The GMC-Chevy dealership in a small neighboring town is down to a skeleton crew. The Chevy-(now)GMC dealer seems to be doing OK. The Ford dealer with the rip-off repair department is in the third owner/name in four years. I don't go by the other car dealer lots in town much so I have not seen how any of the others are doing.

[On the Road]

12. What I Don't Understand Is That

even if a dealership is losing money, don't they still make money for GM by selling a few additional cars and trucks? I must be missing something.

[TexasObserver]

13. If ten franchises remain open in an area that can now support only five, they all might fail.

They'll try to cut out the marginal operations and save the better ones.

[On the Road]

18. Yes, That May be True

but GM wouldn't appear to be harmed. And the dealers do not want to be shut down, or else they would close locations voluntarily.

If there are ten stores selling my product, why would I want there to be five, especially if the need is to sell more units? There must be something about the dealer relationship I don't understand.

[MiniMe]

16. I wonder if they will close the dealership portion and leave the service part open?

That seems like at least a plan to support their current customers.

[tammywammy]

17. I doubt it

The dealer would still have all the overhead of the building, and then they're not using the showroom. Plus, selling vehicles isn't what keeps a dealership open anyways, it's service & parts. Why pay for the showroom if you're not going to use it?