For 661 shuttered GM dealerships, the road back won't be easy

[NINETY EIGHT REGENCY]

For 661 shuttered GM dealerships, the road back won't be easy

Lawsuit continues; emotions still raw

BY TIM HIGGINS

FREE PRESS BUSINESS WRITER

Hundreds of dealers given a second chance at keeping their General Motors franchises have about two months to prove to the company that they've met the requirements to start selling Chevrolet, Cadillac, Buick and GMC vehicles again.

Key on the to-do list: Dealers who received payments to close their GM franchises must repay the money and prove they have enough credit lined up to buy new GM cars and trucks to sell, a copy of the agreement obtained by the Free Press says.

Dave Kring, a Petoskey dealer, said he already has completed the steps required to get his Cadillac franchise back. "Right now we're just waiting for the switch to be flipped so we can start ordering" new product, he said. "We can't wait."

For others, however, burying the hatchet will take longer. "I'm extremely frustrated," said Steve LaBelle, a Massachusetts Chevrolet dealer who's unhappy with GM.

During its bankruptcy, GM moved to close about 2,000 dealerships, saying they were not needed. Earlier this month, however, GM offered 661 of the 1,160 dealers fighting the loss of their franchises the chance to get them back.

GM, whose U.S. sales are up 13% this year, is fighting aggressively for sales as it bounces back from bankruptcy.

Many challenges

Though General Motors is trying to get past problems with dealers as quickly as possible, Steve LaBelle's lawsuit filed in Massachusetts shows how complicated the process is for the automaker.

LaBelle was one of the 1,160 GM dealerships to file for arbitration, to fight to keep from losing his Chevrolet franchise. In the meantime, GM allowed a dealer from a neighboring community to move into LaBelle's sales area, according to the lawsuit filed in early March.

LaBelle, whose dealership is in Bridgewater, Mass., a town about 45 minutes south of Boston, is trying to get an injunction to keep that competitor from selling new GM vehicles until his arbitration is resolved.

It's a complicated situation inherited by Mark Reuss, who became GM president of North America in December, following a management shake-up that included Fritz Henderson resigning as CEO and Chairman Ed Whitacre assuming chief executive duties.

Reuss quickly signaled that improving relations with dealers was one of his top priorities. At the National Automobile Dealers Association's annual meeting in February, he said he wanted to settle as many of the arbitration cases as possible outside of court.

A few weeks later, he announced that GM was offering 661 GM dealers the opportunity to be reinstated. The rest remain in arbitration and face a June 14 deadline that can be extended by 30 days.

LaBelle received one of those offers, according to court filings. Those records give new insight into what GM is asking of those dealers to stay, and LaBelle's response illustrates the raw emotions that remain.

"I'm extremely frustrated," LaBelle told the Free Press by telephone. "I think Mark Reuss is trying to right a lot of the wrongs. ... I think a lot of the old regime that still is there is trying to defend the decisions they made."

The rules: Repay and remodel

LaBelle was promised $250,000 to wind down his dealership. But if he wants to stay as a GM dealer, he now must come up with a line of credit, present $400,000 in working capital and repay GM the $56,000 of the wind-down money he already received, according to court filings.

The letter said he won't be able to order any new vehicles until all of the wind-down money has been repaid.

There also are requirements on what the store must look like. Furthermore, he must withdraw the arbitration claim by April 30.

"I'm not going to sign their letter of intent until they provide me with a customary and usual letter of intent," he said.

While declining to discuss the specifics of LaBelle's situation, Ryndee Carney, a GM spokeswoman, said the terms of his letter of intent were similar to those sent to the 661 dealers offered a chance at reinstatement. Some of the details would be tailored to each dealer's situation.

Carney said LaBelle's lawsuit has "has little or nothing to do with the arbitration process." But she agreed that the case illustrates the complicated nature of GM's dealer arbitration process, especially given the variances in franchise laws among the states.

"This type of thing, in the best of times, is complicated," she said. "That's why it's been so important for us to address each one of these cases individually."

Offer gets mixed reception

Joe Godfrey, of Godfrey Chevrolet Buick in Cadillac, was one of those dealers, facing the loss of his Buick franchise until he received GM's letter offering reinstatement.

"I'm very pleased. ... My family goes way back with Buick," he said.

Godfrey said he was required to return money that GM already had paid him to wind down the Buick franchise -- he wasn't losing his Chevy line.

"I've already sent them a check," he said.

Furthermore, he said, GM gave him an extension on when he must update his facilities. "They've been reasonable," Godfrey said. "They said, 'Times are tough, your road is going to be torn up in front of you. You don't have to do it this year.' "

The decision to fight GM over the dealer process was difficult for many, however.

Allan Rose, a small Buick-Pontiac-GMC dealer in Gloversville, N.Y., said he decided not to appeal the decision because of the cost of arbitration and troubles getting financing for inventory.

Plus, he figured if his dealership had won an appeal, he would be required to spend about $150,000 or more to update his facilities to meet new GM requirements.

"My gut is that I could have beat General Motors on this had it gone to arbitration," he said. "But when you're going to sell 45 or 50 cars a year, what the hell am I going to win?"

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