Tags: GM | Settles | Dealers | Opposition

GM Settles on 4,500 Dealers, Still Some Opposition

Tuesday, 02 Nov 2010 09:45 AM

General Motors will move forward with 4,500 dealers after the automaker, under pressure from Congress angry with job losses, reversed planned closures of more than 800 franchises, the company said.

GM finalized dealership closures and franchise reinstatements over the weekend, one of the final pieces of business to be checked off before beginning its presentation to investors this week on its proposed share sale.

The public offering is designed to return GM to public markets and shake off the government's controlling ownership. The U.S. Treasury obtained a nearly 61 percent stake in GM in return for $50 billion in taxpayer bailout and bankruptcy financing in 2009.

The automaker said it intended to stick with the decision to terminate 1,233 dealerships as of Sunday following months of arbitration and despite continued pressure from lawmakers, including an Ohio delegation that includes House Republican Leader John Boehner, to keep more small businesses open in a struggling economy.

"GM has no plans to extend the deadlines in the wind down agreements with dealers as that process is now complete," the automaker said in a statement.

"An extension would only divert our collective attention at a critical time and would ignore the independent decision of arbitrators and individual settlement agreements between GM and its dealers," GM said.

GM had roughly 6,200 dealerships selling eight brands prior to its 2009 bankruptcy, a number considered by industry experts to be a symptom of bloat and inefficiency. As part of its government-led restructuring, GM proposed 1,245 full closures and 794 partial wind downs.

Jesse Toprak, Vice President of Industry and Trends at TrueCar.com, said GM's 4,500 ceiling is a start but that the company still needs to reduce the network to insure competitiveness and strong pricing.

"Ultimately, I think they would be better served with a lower number," Toprak said, noting that a figure below 4,000 would be better for the viability of GM's remaining brands.

Congressional lawmakers this year sided with dealerships who complained that GM and Chrysler, which closed nearly 800 franchises, were hasty in their decision making. Legislation ordered the two companies to arbitrate disputes. The Obama administration did not support the congressional intervention.

GM's remaining network of 4,500 dealers are selling four brands: Chevrolet, Buick, GMC and Cadillac.

Some Congressional lawmakers, on the eve of an election that is expected to shift the balance of power in the House of Representatives to Republicans, remain dissatisfied with GM's decision. A group from Ohio has asked President Barack Obama to suspend dealership closures temporarily.

These lawmakers, in a letter to Obama last week, said they want to give affected businesses more time to analyze the results of an investigation by a government watchdog this summer that raised questions about the criteria used by GM and Chrysler to determine what franchises to cut.

The administration did not object to GM and Chrysler's initial plans for dealer closings, saying that streamlining the network would help make the companies viable.

The Treasury bristled at the follow-up investigation by the special inspector general for the Troubled Asset Relief program, the source of government bailout funds for GM and Chrysler, that found in July the administration's autos task force did not fully weigh the impact of dealer closings on potential job losses.

© 2017 Thomson/Reuters. All rights reserved.

   
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General Motors will move forward with 4,500 dealers after the automaker, under pressure from Congress angry with job losses, reversed planned closures of more than 800 franchises, the company said. GM finalized dealership closures and franchise reinstatements over the...
GM,Settles,Dealers,Opposition
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2010-45-02
Tuesday, 02 Nov 2010 09:45 AM
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