Some Axed GM Dealers Selling Only 35 Vehicles Per Year
UPDATED at 12:50 P.M.:
About 400 to 500 of the GM dealers that are set for termination by the end of 2010 have been selling only about 35 vehicles per year, Mark LaNeve, GM's vice president of sales, service and marketing said in a conference call concluded moments ago.
The Ticker has never run an auto dealership, but selling 35 vehicles per year does not seem like a formula for staying in business.
GM said the axed dealers are underperforming and not profitable enough.
Many of the remaining 1,100 that received termination letters today were in "danger of going out of business anyway," LaNeve said, because their profitability is so low.
He said that the 1,100 dealers -- which make up 18 percent of all GM dealers -- made up only 7 percent of GM's 2008 sales. On their lots are about 8 percent of GM's national inventory, or about 65,000 new vehicles.
"Unless they haven't been paying attention at all, it should not be a surprise to them what their [performance] scores are," LaNeve said.
About 90 percent of the remaining 4,300 GM dealers will be given the chance to remain with GM, meaning that another 10 percent dealer whack is coming.
The math is a little confusing, so let's break it down: There currently are about 6,000 GM dealers and GM says it wants to get down to the 3,600 to 4,000 range.
Today, 1,100 were told that they would not be part of GM beyond the end of 2010. That leaves you with 4,900 dealers. Another 500 are Hummer, Saturn and Saab dealers -- all owned by GM -- that GM wants to sell or spin off. That leaves you with 4,400 dealers.
About 90 percent of the remaining 4,400 will be asked to stay with GM, so that means another 10 percent of dealers will be cut, leaving you with 3,960 dealers. Finally, GM expects a certain amount of that number will chose to leave GM on their own, leaving with a final dealership number of between 3,600 and 4,000.
LaNeve said that the federal automotive task force, running out of the Treasury Department, has not seen the list of axed dealers and did not pick dealers to be terminated or mandate a number.
LaNeve said that the problem with GM is "not too many dealers; we have too few sales." He said the dealer network needs to be pruned in order to make sure that the remaining ones are only the healthiest and have the best chance of attracting new investment to grow.
Implied is this: Even though a GM dealer does not cost GM any money -- it provides revenue, by buying new vehicles wholesale from the company -- a sick GM dealership that sells only 35 vehicles per year is a suck on the company's brand and cannot compete with the Toyota, Ford and Honda dealers across town.
LaNeve is holding the conference call from his Cadillac Escalade and was asked by a reporter what he would say to a mechanic or secretary who worked at one of the 1,100 dealers that will be closed if they were sitting in the passenger seat of the Escalade right now.
"Next question, please," LaNeve tried to joke, before quickly saying it's a "tough question" and that he "knows many of the dealers personally."
"You have to build for the survival of the enterprise," LaNeve said.
GM Begins Contacting 1,100 Axed Dealers
11:41 A.M.: GM announced moments ago that it is beginning to contact the 1,100 dealers who are being told that GM does not see them as part of its dealer network on a long-term basis," the company said in a release, adding that it is not terminating any dealerships today.
The nation's 5,969 GM dealers will be reduced to about 4,400 by the end of 2010, the company said. Targeting dealers include those that are "underperforming" and those with "very small sales volume," GM said.
About 1,100 of the dealers are GM dealers proper, with the remaining 500 or so being Saturn, Hummer and Saab dealers, which GM hopes to sell.
“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.”
LaNeve continued: “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."
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