General Motors told more than 1,100 dealers that their franchises would not be renewed next year, bringing the total for the week to nearly 2,000 car dealers that learned they were no longer wanted.
The action, which involved only half of the showrooms that G.M. ultimately hopes to eliminate, was another step toward a probable bankruptcy filing at the end of this month.
Though G.M. says it still hopes to avoid bankruptcy and subsist on more government loans, Mark LaNeve, G.M.‘s vice president for North American sales and marketing, acknowledged that the dealer cuts “would be hard to enforce” outside of court.
The letters to G.M. dealers arrived just one day after Chrysler sent similar notices to 789 dealers. Chrysler is asking a bankruptcy judge to terminate the agreements with its castoffs by June 9.
In 2008, Chrysler dealerships sold an average of 303 new vehicles each, compared with 1,292 sales at an average Toyota showroom, Chrysler said in filings in bankruptcy court.
Chrysler said its “rejected dealers,” as it called them, accounted for nearly a quarter of total stores, but 14 percent of sales.
Likewise, the 1,100 G.M. dealers that got a letter Friday represent 18 percent of G.M.‘s 5,969 outlets, but just 7 percent of last year’s sales. Nearly 500 of them sell fewer than 35 new G.M. vehicles a year, Mr. LaNeve said.
The companies say that cutting dealerships will lead to higher and more profitable sales at the ones that remain, but Mr. LaNeve conceded that sales most likely would be hurt for as long as 18 months.
“In the short term there is a risk that we would lose some sales,” he said. “What is critical is that we have a healthy, viable dealer network.” NY Times
GM and Chrysler are trying to reorganize and stay afloat through a severe recession that has drastically reduced car and truck sales for U.S. automakers, which had already been losing market share to foreign companies for decades.
The letter that arrived at Quinn’s dealership - whose motto was listed on its Web site as “Large enough to serve you . . . Small enough to care” - didn’t specify why his shop was targeted, but he believes it may be because he runs an older facility. He said he thought that shouldn’t matter.
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