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GM to cut ties with 1,100 dealers

WATERLOO (KWWL) -- General Motors is updating dealers about plans to not renew their franchise agreements in the coming years.

On Friday, General Motors told about 1,100 dealers their franchises will be terminated late next year. The specific dealers have not been released.

The struggling automaker says it has too many dealerships for too few sales and must make the cuts as part of its government-ordered restructuring plan.

This comes less than 24 hours after Chrysler announced it would cut ties with close to 800 dealers, included 22 in Iowa.

Rydell Chevrolet in Waterloo was one of the lucky ones.   

General Motors plans to reduce it's dealer network from almost six-thousand stores to around 3600 by the end of 2010.

"Deep down it is stressful, but we had piece of mind knowing that we have great customers service. Our customer service satisfaction rating though General Motors is at an all time high. Our service department is doing a great job, they're always busy and we're selling a lot of cars.  We really didn't have a lot to worry about but there is that small feeling that you don't want to be the one to get the letter," said Halbur.

Approximately 1100 underperforming and very small sales volume U.S. dealers will be told that General Motors does not see them as part of it's dealer network in the future.

"Our preference is to accomplish our goals and objectives and accomplish the restructuring of the company outside of a bankruptcy process. My judgment, its certainly more probable today, it is probable today that we would need to revert to a chapter eleven process," General Motors CEO Fritz Henderson said.

General Motors Statement:

As noted in our recent S-4 filing and updated Viability Plan, General Motors plans to reduce its dealer network from 5,969 stores today to approximately 3,600 by the end of 2010.

This process starts today, as GM begins contacting dealers regarding its long term planning. Approximately 1,100 underperforming and very small sales volume U.S. dealers will be advised that GM does not see them as part of its dealer network on a long-term basis. In most cases, existing franchise agreements run through October of 2010.

In addition, we will be updating about 470 Saturn, Hummer and Saab dealers on the status of those brands and we will be discussing how the remaining dealers will support our retail plans going forward. While additional cuts will be made, we believe the vast majority, over 90 percent, of the remaining dealers will be offered a chance to remain with GM. However, specific dealer issues, further attrition and additional possible dealer network actions are expected to bring the number of future GM dealers to around 3,600 by the end of 2010, as described in the Plan. The actual number could vary given levels of attrition, etc. outside of GM's control.

"We have said from the beginning that our dealers are not a problem but an asset for General Motors," said Mark LaNeve, GM Vice President of Sales Service and Marketing. "However it is imperative that a healthy, viable GM have a healthy, viable dealer body that can not only survive but prosper during cyclical downturns. It is obvious that almost all parts of GM, including the dealer body, must get smaller and more efficient."

"In response, we are letting them know about our long term plans. GM's viability plan calls for fewer, stronger brands as well as fewer, stronger dealers. We have taken a very difficult step by identifying those dealerships we'd like to keep in the GM dealer network and those with whom we will have to wind down our business relationships," LaNeve said.

As independently owned businesses, dealer owners will make their own decisions if and when they want to make this information public. GM is not releasing the names of any dealers.

"We are not terminating any dealerships today," LaNeve clarified, "We will be talking to all of our dealers over the next few weeks, letting them know now in the spirit of open communication, so they are advised well in advance, about our long-term plans and their role in them. Long term, GM should have fewer, healthier dealers, maintaining GM's current high customer satisfaction ratings, with more sales per outlet."

Online Reporter: John Wilmer