NEW YORK—General Motors Co. executives said over the weekend that the company would reinstate 661 dealerships it sought to drop from its dealership network, a positive development for car dealers across the nation and their supporting communities.
That number represents more than half of all dealerships currently fighting to remain open, selling GM-branded vehicles. In addition, GM will enter into arbitration with up to 400 separate dealerships over their closures.
Some analysts viewed the move as an effort by GM to stem its loss of market share in the United States. Last year, GM’s U.S. market share was 19.9 percent, a drop from 22.3 percent market share in 2008, according to data from Autodata Corp. Last month, Ford Motor Co. sold more cars and trucks than GM for the first time since 1998.
Last year, GM told roughly 2,000 of its 6,000-plus dealerships in the United States that it would drop its franchise agreement in an effort to stem costs and reduce its footprint as the company worked through a government-assisted bankruptcy. GM believed that its number of dealerships was unsustainable given the shrinking automobile market.
“We are eager to restore relationships with our dealers, and get back to doing what we do best—selling cars and taking care of customers,” said Mark Reuss, president of GM North America in a statement. “The arbitration process creates uncertainty in the market. We believe issuing these letters of intent is good for our customers, our dealers, and GM.”
Dealers content
GM has sent a letter of intent to the more than 600 dealerships to offer them a renewed franchise agreement. Company representatives will be calling the affected dealerships by close of business on Monday to notify them of the decision.
Dealerships have ten days to review the document, sign it, and return the letter to the manufacturer.
The agreement is a compromise to the longstanding tussle between GM and its dealers. Some dealerships argued that the automaker is out-of-touch, and that mass shuttering could close profitable dealerships while neglecting unprofitable ones.
For GM, the agreement also avoids expensive legal fees and other costs associated with the arbitration process with more than 1,100 dealerships that fought their closures. Also, the reinstatement lets GM control which dealerships should remain open.
The National Automobile Dealers Association (NADA), a trade organization of car dealerships in the United States, applauded the move. NADA Chairman Ed Tonkin called GM’s decision “a significant move forward in advancing the state of dealer relations.”
“We appreciate the good faith effort that GM is showing and hope that this carries forward in its continuing settlement and arbitration discussions with the remaining wind-down dealers,” Tonkin said in a statement.
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