General Motors Corp. (GM) is offering dealers $100,000 to $1
million to go out of business voluntarily before the auto maker
moves to force them out of business in bankruptcy court, a dealer
familiar with the situation said.
A day after its bankruptcy filing, GM on Tuesday sent letters to
each of its 6,000 dealerships informing them whether they are
marked to close or not under the auto maker's plans to shed
thousands of U.S. dealerships.
In the letter, GM tells dealers on the closing list they can no
longer buy new vehicles but have until October next year to sell
down their inventory, according to a dealer who received one of the
letters.
The auto maker has said it plans to shutter 2,400 dealerships.
The company sent letters to 1,000 dealers last month informing them
they are on the closing list.
Dealers have until June 12 to accept or decline the offer. If
they decline, the dealers will have to take their chances fighting
GM in bankruptcy court. Chrysler LLC dealers in the same position
have had little luck challenging the auto maker in Chapter 11
proceedings. Chrysler is taking advantage of bankruptcy to close
789 of its 3,200 dealers.
"This is a very fair settlement we believe we're offering to the
dealers," GM Chief Financial Officer Ray Yong said Tuesday in a
conference call with analysts and media.
Young said GM has set aside a pool of money to buy out dealers,
but wouldn't say how much the auto maker expects to spend. He also
said the company expects litigation from dealers will add to the
unsecured claims GM must deal with in court.
The dealers that remain, Young said, will be expected to operate
at a 'very, very' high performance level.
-By Sharon Terlep, Dow Jones Newswires;
sharon.terlep@dowjones.com