GM Adding New Dealerships, Frustrating Old Ones

November 12, 2009
Chevrolet dealership

Chevrolet dealership

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.


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