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GM Adding New Dealerships, Frustrating Old Ones

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When Chrysler and GM underwent restructuring earlier this year, they took the opportunity to thin out their dealer networks. As you might recall, that resulted in substantial consternation among dealers, lobbying groups, and elected officials. But while threats of litigation and offers of mediation still hang in the air, there may be a glimmer of hope on the horizon -- at least for some of GM's eliminated dealers.

In late September, General Motors sent out a batch of RFPs -- requests for dealership proposals in markets where GM hopes to beef up its presence. While the RFPs weren't sent exclusively to terminated or shuttered GM dealers, it's clear that at least a dozen of those folks were on the list. However, it's also clear that other entities -- perhaps other dealers, perhaps various entrepreneurs -- have also been invited to apply. Of the proposals submitted to GM so far, three have been accepted.

This is a pretty dicey move for GM. For the better part of a year, General Motors has insisted that it's working to become more streamlined, more efficient; a major element of its restructuring plan has involved reducing the company's dealership network from 6,000 to 3,600 outlets.

Now, there's no problem in GM reassessing those numbers, and it's encouraging to hear that General Motors might be able to accommodate more dealerships than originally thought. (Perhaps the expansion is rooted in General Motors' new-found stability, which is currently just a rumor, but might be confirmed next Monday, when CEO Fritz Henderson reveals GM's third quarter financials.) However, if GM is planning to expand rather than contract, the company would be wise to give existing dealers some sort of right of first refusal. On the marketing and corporate relations front, that would indicate that GM is working in good faith, which in turn could ease the ire of terminated dealers and obviate some major legal fees.

However, that doesn't appear to be what's happening. Based on the information at hand, we have to assume that General Motors' dealer terminations included not only duplicative and underperforming outlets, but also those that the company simply didn't like. That's not surprising -- in fact, we rather suspected it -- but the latter dealerships are likely to get vocal if new dealers in their area are rolled into the GM network while they're left standing in the cold.

[Freep]

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Comments (10)
  1. GM. Meet the new, same as the old.
    More "change" talk but inbred cultural behavior is tough to change.
     
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  2. Isnt this the same thing companies do when they let go of the older employees? The alternative is a socialist system
     
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  3. I'm not sure you are right about "...This is a pretty dicey move for GM."
    I think they want (in the end of the day) to improve their dealerships and one way to do it is to get rid off the old ones and bring some new, hungry ones.
     
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  4. Well, I wish GM all the best in getting their problems solved. And not just because I have a not-so-theoretical several thousand dollar share (read: tax dollars) in the company.
    But yes, they're going to have to make some harsh cuts to carry forward in any kind of good shape. Can't lose weight by keeping all the fat.
     
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  5. so a new CEO who is an internal guy in such a cultural mess and we get surprised that there is no change?
     
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  6. Given the general quality of first-line salespeople at GM dealers I visited last time I tried to buy a car, I would be happier if they burned every damn dealer to the ground and started fresh. The state laws protecting dealers, and insisting that manufacturers MUST sell cars through independent third parties, are a crock that rip off the U.S. car buyer every day and night. GM dealers could take lessons from Lexus et al from now til Doomsday and they wouldn't get it. The DEALERS may be what prevents GM from becoming a viable company and paying back our damn loans.
     
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  7. This is a recipe for disaster. GM already had a reputation for preferring higher-volume dealerships in the suburbs over its smaller but higher-profile urban outlets -- especially at the coasts, and incidentally those that would allow conquests from other brands. Here they go again. Time to buy some land out at the megastore by the exurbs and try to sell the Volt, the Cruze, or their other smart-looking upcoming products. Uh huh.
     
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  8. my $0.02 would be to slow way the heck down on expanding dealerships. wait until you have the high class problem of too much demand from consumers who are clamoring for new outlets. yes GM would indeed lose some sales. but think we now all know that sometimes leaving a little top line on the table if the cost is mammoth investments which turn into unsustainable fixed costs.
     
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  9. @LimousineLiberal: I think that's EXACTLY the point. I'm all for GM making a profit, but they ought to think VERY carefully before adding dealerships -- a process that can't be easily reversed if the expansion strategy doesn't pan out. There are other ways to boost output and increase market penetration without all that. And besides, there's a bit of truth to that old showbiz saying: "Leave 'em wanting more".
    _
    In other news: some people toss around the word "socialist" as if it's universally acknowledged as an awful thing -- the moral equivalent of, say, alcoholism or child pornography. Which is pretty weird, not to mention presumptuous.
     
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  10. adding dealerships isn't the silver bullet. What needs to happen is GM should LISTEN to the dealers as should other manufacturers. This is where the disconnect lies. I saw an interview with the owner of the largest dealership in Michigan. His dealership has sold more Buicks than any other dealer in the US. He invited LeNave to discuss the challenges and ideas that made him successful. Did LeNave visit? No-too busy.
     
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