By Andrea K. Walker, The Baltimore Sun
May 16--General Motors dealerships around the country were finally able to breathe a sigh of relief, while others saw their worst fears come true, as the automaker sent out letters Friday to end 1,100 dealer contracts next year.
The letters went to about 20 percent of the dealers that sell the troubled automaker's vehicles and stated that GM would no longer do business with them when their contracts expire in October 2010. It was unclear how many of the 95 GM dealerships in Maryland would be forced out of business because the company did not offer specifics, including which dealers it targeted.
Reporters from The Baltimore Sun called more than 50 dealerships, and while many of the owners didn't return calls, more than a dozen said they hadn't received letters or were told they wouldn't have to close. Others were still awaiting word.
"This has been a difficult process, and we took it very seriously," Mark LaNeve, North American vice president of vehicle sales, service and marketing for GM, said during an afternoon conference call. "It's not something we didn't do with a lot of deliberation, a lot of thought and a lot of poring over the list."
The announcement by GM came just a day after Chrysler LLC notified 789 dealers, or 25 percent of all its dealers, that it was shutting them down. Both companies are trying to turn themselves around financially, even as consumers have cut back drastically on car buying. Chrysler is reorganizing under bankruptcy while GM is trying to avoid also ending up in court. GM wants to reduce the number of dealerships from 5,969 to 3,600 by next year.
The closings by both automakers could have a devastating effect on cities across the country, putting as many as 100,000 people out of work, according to one industry group. It could also force many dealers, who have invested millions into their businesses, into financial straits. Some have said they might have to declare bankruptcy.
The Maryland Automobile Dealers Association said Friday that it had received calls from about six dealers who said they got letters from GM. A man at Damascus Motor Co. Inc. said the dealership has gotten notice it had to close, but he declined to give his name or comment.
Russell Barrett, president and general manager of Barrett Chevrolet in Berlin, didn't get a letter and said his district manager told him the dealership was safe. Barrett, whose grandfather started the business in 1951, said he was nervous awaiting word even though the dealership has remained profitable.
"We are very happy we've been here for 58 years and it is business as usual," Barrett said. "Talk about anxiety: waiting for a letter to come to find out if you're going to be able to stay in business."
GM chose dealerships to close based on performance standards they regularly use to monitor them. In many instances, the company chose dealerships with low sales. The 1,100 dealerships made up just 7 percent of sales last year, and nearly 500 of them sell fewer than 35 new GM vehicles a year.
"They're dealerships that are in most cases hurting, losing money and in danger of going out of business anyway," LaNeve said. "It's a move that people could argue should have been taken years ago, but this leadership team had no choice but to do it today."
Billy Bender, president of Billy Bender Chevrolet Inc. in Grantsville, said he wasn't going to have close the dealership that has been in his family since the 1930s. He said the "report card" GM used to make its decision is "really good." But Bender questioned why GM would close any dealerships at all.
"I don't see how it's going to save them money," Bender said. "I think their issues lie from within and not from outside."
Unlike Chrysler, LaNeve said, GM wanted to give dealers time to "unwind" the business so there is not a glut of cars on the market. GM would have to buy back the inventories of dealers who go out of business.
The Maryland Automobile Dealers Association argues that cutting dealers doesn't save the car companies money, loses revenue and creates unemployment.
LaNeve acknowledged that the closings would result in a short-term revenue loss but said in the long run it would create more efficient and profitable dealerships. Dealers may appeal the decision with the company and can challenge it in court.
John Bowis, owner and president of Chevy Chase Nissan and Chevy Chase Acura, said he got scared when talks started about a GM bankruptcy and got out of the business. GM bought back the last of his inventory last month. The company had sold GM since his grandfather started the business 70 years ago.
"I really am very concerned about all my friends that are still GM dealers," he said.
Baltimore Sun reporters Lorraine Mirabella, Gus G. Sentementes, Phill McGowan and Hanah Cho contributed to this article.
-----
To see more of The Baltimore Sun, or to subscribe to the newspaper, go to http://www.baltimoresun.com.
Copyright (c) 2009, The Baltimore Sun
Distributed by McClatchy-Tribune Information Services.
For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
NYSE:GM,
A service of YellowBrix, Inc.
