GM Asks Bankruptcy Judge To Void 70 Dealer Contracts
07 Juli 2009 - 6:16PM
Dow Jones News
General Motors Corp. (GMGMQ) Tuesday asked a bankruptcy judge to
cancel 70 dealer contracts, a move that would eliminate the last
holdouts in the company's push to shutter up to 2,400 U.S. stores
by 2010.
The auto maker said the closings will eventually save around
$2.4 billion a year in dealer subsidies, advertising support,
incentive payments and other expenses. GM sought to reduce by
one-third its network of 6,000 auto dealers, arguing the sprawling
network included too many unprofitable and outdated stores that
dragged on the company's bottom line.
"A leaner, more profitable dealer network with higher annual
vehicle sales per dealership is essential to reducing GM's
staggering dealer support costs and a critical component of helping
to ensure the viability of New GM," GM said in the filing.
GM extended wind-down offers to more than 1,000 dealers it had
marked to close, which would allow the stores to remain open until
October 2010, but bar them from ordering more vehicles. GM said 98%
of those dealers accepted the offers.
The company reversed its decision on about 60 dealers after
rigorous opposition from dealerships and many lawmakers who fought
the closing plans. In deciding which dealers to close, GM said, it
analyzed each store's sales, customer satisfaction scores,
capitalization and profitability.
In addition, GM targeted dealerships that sold fewer than 50
vehicles a year, those that had been unprofitable for three years
in a row and those that sold non-GM brands under the same roof and
also had poor performance.
GM's approach to dealers differed from that of rival Chrysler
Group LLC, which sought and received a court order to terminate 789
out of about 3,200 dealer contracts in bankruptcy court with no
closing offer.
The contracts GM seeks to terminate cover 70 stores owned by 38
dealers, including chains in South Carolina, Alabama and
Oklahoma.
-By Sharon Terlep, Dow Jones Newswires; 248-204-5532;
sharon.terlep@dowjones.com.