GM won't pay dealers for franchises, will buy back parts, vehicles

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GM won't pay dealers for franchises, will buy back parts, vehicles



In a special broadcast to dealers yesterday, General Motors' sales chief, Mark LaNeve, explained that the automaker would buy back unsold new vehicles and parts from dealerships slated to be phased out by the end of 2010, but GM wouldn't pay off dealers for their franchises.

As reported earlier this week, GM plans to cut it U.S. dealerships by 42% by the end of next year, reducing the total number of retailers from 6,246 to 3,605. Beginning this May, GM will begin sending letters to around 1,200 dealers informing them that their franchises will not be renewed and "they will not be part of a reinvented GM going forward."

According to LaNeve, the 1,200 or so dealerships slated to be cut are "very poor performing and not adhering to the sales and service agreement obligations." Joining the underperformers will be an additional 500 dealerships in saturated urban markets, another 500 that will be shuttered by the end of the year due to normal attrition, yet another 500 retailers that carry Hummer, Saab and Saturn vehicles – brands which GM is desperately trying to unload – along with 35 stand-alone Pontiac dealers that will meet their demise when the brand is phased-out at the end of 2010.

How this is all going to sit with dealer franchise laws remains to be seen, but after watching the Oldsmobile debacle play out, we doubt any resolution between GM and its dealers will be easy.