General Motors pulls back on dealership cuts

By DEE-ANN DURBIN and TOM KRISHER
The Associated Press
DETROIT – General Motors will keep open about 900 dealerships across the country that it had planned to close, a shift in corporate strategy that could preserve thousands of jobs.
The automaker will wind up with about 5,000 U.S. dealers in July, up from original plans for 4,100, Mark Reuss, GM’s North America president, told The Associated Press. It had about 6,000 when it filed for bankruptcy last year.
The change represents a desire by GM’s new leadership team to avoid the expense of closing dealerships, a step they say is not critical to bring the company back to profits.
GM’s large dealer network “used to be one of our main, massive strengths,” Reuss told the AP during a recent test drive of the new Chevrolet Cruze. “I still think that’s true. It can be true with the right dealers.”
July is the end of a federally mandated arbitration process under which dealerships that GM and Chrysler Group had targeted could appeal. Partly because of GM’s strategy change, only about a quarter of the 1,576 cases brought by GM and Chrysler dealers remain before arbitrators.
GM on Tuesday would not estimate how many total jobs might be saved. The National Automobile Dealers Association, a trade group, says about 50 people work at an average new-car dealership.
Change of plans
Both GM and Chrysler announced plans to shed 2,800 dealerships as part of their reorganizations. The companies said their U.S. sales didn’t justify so many dealers – nearly 10,000 between them. By comparison, Toyota has only about 1,200 even though it’s the second-largest automaker by U.S. sales.
GM and Chrysler also argued that closing some dealers would make the remaining ones more profitable and allow them to invest in nicer facilities, advertising and training.
GM’s last CEO, Fritz Henderson, convinced an Obama administration task force that GM needed to close struggling dealers. But he was ousted in November, just before Congress passed a law requiring arbitration before either automaker could cut a dealership loose.
Since the arbitration hearings began in February, most cases have been settled – either because GM and Chrysler reinstated dealers or the dealers withdrew their cases, some of them to sign with other automakers, others to close for good. About 300 GM dealers and fewer than 100 Chrysler dealers targeted for closure are still awaiting a decision from arbitrators.
Reuss wouldn’t elaborate on the change in GM’s strategy.
“I’m concentrating on what it needs to be for the new GM,” he said. “I think we’ve removed a lot of the anxiety and all the things that go with that.”
Chrysler, too, will have more dealers than it planned when it emerged from bankruptcy, although it won’t say exactly how many. It closed about 800 last summer but has since agreed to reinstate about 10 percent of those.
Chrysler has been more aggressive than GM in closing dealerships. It sued North Carolina and four other states to stop state laws that would have protected dealers.

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