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GM offers 661 dealers a chance to keep businesses open

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GM offers 661 dealers a chance to keep businesses open

Bryce G. Hoffman / The Detroit News

More than 600 General Motors Co. dealers seeking franchise reinstatement have been notified that they are on the automaker's list to remain open.

Alan Spitzer, head of the Committee to Restore Dealer Rights, said most of those contacted by GM were rural dealers or Cadillac franchisees.

GM said Friday it planned to send letters of intent to restore the franchises of 661 of the 1,160 dealers that were appealing orders to close. By Monday afternoon, GM said it had notified all of those dealers by phone.

"They will receive their actual letters by the end of this week," said GM spokeswoman Ryndee Carney. "It's up to them how quickly they move now."

Spitzer said terms of reinstatement would include providing proof that the dealership had secured the necessary location, facilities, financing and working capital to operate.

He said dealers who asked for specifics Monday were told that the terms would be the same ones they would be bound by if they prevailed in arbitration, a fact confirmed by GM.

Jim Eagan, an automotive consultant with Plante & Moran PLLC, said some dealers will find it difficult to meet those requirements, given the tough economy.

"The floor plan financing and working capital financing are going to be difficult to obtain unless the borrower has a strong balance sheet," he said. "But many of the dealers who filed for arbitration fervently felt that they were capable of continuing."

Spitzer praised GM's move and urged Chrysler Group LLC to extend a similar offer to the 789 dealers it ordered to close during its bankruptcy. He also urged GM not to turn its back on the rest of the dealers who lost their franchises.

"We're hoping that GM will do the right thing, which is to reinstate them all if they want to come back," he said. GM and Chrysler were able to tear up franchise agreements with thousands of dealers after seeking Chapter 11 protection in 2009. GM alone planned to close more than 2,000 dealers by October, but that was before Congress passed a new law in December that gave dealers the right to challenge those decisions through binding arbitration.

Chrysler said it would stick with its plans for arbitration for the fewer than 400 dealers that have begun that process.

"A robust dealer network is a critical component of Chrysler Group's strategy of rebuilding a strong and resilient American automaker," the company said in a statement.

Its dealers won't have the same experience that Crown Motors in Holland had Monday after getting a call from GM. Crown had been ordered to close its Buick and Cadillac stores.

"There were cheers and tears," said owner Craig Wierda. "People were so excited and grateful that they get to keep their jobs."

He did not anticipate any difficulty complying with the terms in the letter, assuming they were similar to those required of any new franchisee.

GM Chairman and CEO Edward Whitacre Jr. has said the company was likely to reinstate hundreds of dealers as a result of that decision, but said that would not jeopardize the company's turnaround plans.

Carney acknowledged the law had changed the equation.

"We looked at it through a different prism because we knew the arbitration would be looking at not just what was good for the manufacturer, but also what was good for the dealer and for the community as a whole," she said. "We think that it will be a good thing to have as many good dealers out there to sell our products and take care of our customers as possible."

Some experts say restoring dealerships could help stanch GM's recent market share losses, at least in the short term.

"Right now, there's a battle for market share," Egan said. "Allowing these dealers to reopen could increase sales."

Carney said dealers will have 10 days to review the terms outlined in the letters, sign them and return them to the company. They will then have 60 days to comply with those terms.

From The Detroit News: http://www.detnews.com/article/20100309/AUTO01/3090329/1148/auto01/GM-offers-661-dealers-a-chance-to-keep-businesses-open#ixzz0hgeQrTsC

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