GM pulls back on dealership cuts

Published June 8, 2010 7:28 pm
Strategy • Utah franchises among those back in fold.
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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.

At least two dealerships have been reinstated in Utah.

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 ending dealership agreements, a step they say is not critical to bring the company back to profitability.

GM's large dealer network "used to be one of our main, massive strengths," Reuss said. "I still think that's true. It can be true with the right dealers."

Craig Bickmore, executive director of the New Car Dealers Association of Utah, said GM started thinking about reinstating many of its dealers after the federal government required the automaker to offer targeted dealers appeals through an arbitration process.

"They started reaching out to their dealers even before arbitration started," Bickmore said. "As a result, the vast majority of those who were [to be cut] in Utah were allowed to take their stores back."

Those Utah dealers included Painter Motor Co. in Nephi, which got its Buick and Chevrolet franchise back in March, and Hansen Motor Co. in Brigham City, which was able to keep its Cadillac dealership.

GM never revealed how many dealerships it planned to cut on a state-by-state basis.

July marks the end of the federally mandated arbitration process. 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.

GM and Chrysler had 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's previous 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.

In the case of Chrysler arbitrations, arbitrators are siding with the automaker more often than not. As of Tuesday, they have decided 22 cases in Chrysler's favor and six in favor of dealers. Included among the six was Homer Cutrubus,the owner of Cutrubus Motors Chrysler, Jeep and Dodge dealership in Layton.

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