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NADA '01: Winding Down Olds


Don’t look for a last-minute reprieve for Oldsmobile. That was the clear and unambiguous message that General Motors officials delivered to Olds dealers on the final day of the National Automobile Dealers Association’s annual convention.

Hundreds of dealers packed into the Las Vegas convention center for their first formal meeting with GM leaders since learning the Olds brand would be phased out. Ironically, since the decision was announced on December 12th, Oldsmobile has registered some of its strongest sales in years, with demand so robust for some models, dealers have been running short of product.

Bill Lovejoy NADA 2001But despite that unexpected upturn, the phase-out is “a decision that’s not going to be reversed. It’s not going to be revisited,” said Bill Lovejoy, director of GM’s Vehicle Sales, Service and Marketing Operations.

Shellshocked

The meeting between GM and its dealers was marred by frequent and angry outbursts, many retailers seeming shellshocked as they walked out of the session.

“It’s like your favorite grandfather has died. You go through disbelief and anger,” said Wes Rydell, head of a dealer group that has more than 30 showrooms nationwide, including eight Oldsmobile dealerships. But “no amount of stamping will change the fact that Oldsmobile is dead.”

What dealers do hope to change is the payout GM plans to offer them for their lost investments. The automaker set aside a $500 million reserve to cover the Olds closing, though many observers believe that figure will swell as it works out settlements with its 2801 Oldsmobile dealers.

In a January 26th letter, GM laid out two alternatives for Olds franchisees. One plan would pay them between $1675 and $2900 for every vehicle sold during the dealer’s best year since 1998. The alternative would put the figure somewhere between $1500 and $2400, but add in compensation for “special circumstances, such as money invested for recent showroom renovations or new signage.” One Olds dealer recently was told to sign a 10-year lease for new property in order to upgrade his showroom.

“We were involved in that process,” and must share in the cost, said Ron Sobrero, GM’s general manager of dealer relations.

As many as 10 percent of the dying division’s dealers have already indicated they plan to accept the standardized settlement. But either way, the automaker intends to “far exceed what we’re required to do” under its franchise agreement and state franchising laws, Lovejoy insisted. He also acknowledged there’s likely to be some intense negotiations before Olds can formally be closed down.

Taking GM’s terms

Despite their disappointment, most of the dealers attending the session seemed glumly resigned to working out a settlement on GM’s terms. “I believe it’s going to work out,” said Wayne Edwards, of Moultrie, GA. But a vocal minority did not seem ready to go without a fight.

Dan Myers, a lawyer with the Tallahassee, Fla., firm of Myers, Forehand and Fuller, claims to represent 200 Oldsmobile dealers studying various options that could eventually include individual or class-action lawsuits against General Motors.

“Those dealers aren’t going to go away unless they get a fair deal,” warned Myers, though he quickly added that he has advised his clients against taking any action before seeing what GM comes up with.

For his part, GM’s Lovejoy suggested that if a class action is filed, the automaker “would stop talking” to its Oldsmobile dealers. It seemed a veiled counter-threat designed to encourage peer pressure that would prevent disgruntled Olds retailers from going to court.

In recent weeks, there have been persistent rumors GM will divide up the Oldsmobile model lineup between its other divisions. The new Olds Bravada, for example, would go to Cadillac, if the reports are accurate. If that were to happen, it would only make it easier to sue, Myers said.

But Lovejoy said a product shift is not in the works. “It’s not our intention to take the Olds products, rebadge them and put them in another division.”

Instead, GM plans to continue Oldsmobile for at least several more years, depending upon market demand for products like the Bravada. Sales have actually surged over the past two months, buoyed in large part by hefty incentives and an extended, five-year/50,000-mile warranty.

As a result, said dealer Wally McCarthy, of St. Paul, Minn., “We could have two years, even three years,” before Oldsmobile builds its last car.

For more TCC coverage on the 2001 NADA show, click here.

For more coverage on the NADA convention, visit Automotive Executive Magazine (www.aemag.com).

Related Articles
Olds Axed: TCC Special Report (Dec. 30, 2000)

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