UPDATE: GM Contacting Dealers On Closures; Looking At Brands
16 May 2009 - 2:47AM
Dow Jones News
General Motors Corp. (GM) said Friday it has notified 1,100
dealers they will be phased out of business by October 2010 as part
of plans to eliminate 40% of its stores by the end of next
year.
GM also said Friday it will update 470 Saturn, Saab and Hummer
dealers on the status of its efforts to offload those brands. The
dealer reduction affects 2,369 stores.
GM's shares dropped 5.2% to $1.09 in recent trading amid a broad
market downturn.
"It is imperative that a healthy, viable GM have a healthy,
viable dealer body that can not only survive but prosper during
cyclical downturns," GM sales chief Mark LaNeve said in a
statement. "It is obvious that almost all parts of GM, including
the dealer body, must get smaller and more efficient."
The cuts are part of GM's efforts to downsize as it faces a June
1 deadline from the Obama administration to restructure or file for
bankruptcy.
Determined to avoid the huge costs involved with cutting
Oldsmobile brand dealers earlier this decade, GM has said it will
draw down dealer inventories and allow contracts to run out
naturally.
The auto maker will not renew contracts of dealers who own
stores GM thinks should close. Most of GM's contracts with dealers
expire in October 2010.
GM said it wouldn't release the names of the dealers affected
since they are independently owned businesses.
Thursday, Chrysler LLC said it would seek to immediately drop a
quarter of the dealers from its retail network, or 789 stores,
according to papers filed with the bankruptcy court overseeing its
Chapter 11 case.
The auto maker needs to streamline the dealer network so that
the company "can begin implementing efficiencies, marketing
strategies, production plans and model changes" that will make the
company more profitable, the auto maker's director of dealer
operations, Peter M. Grady, said in a statement filed with the
court.
-By Sharon Terlep; 248-204-5532; sharon.terlep@dowjones.com.