- The Washington Times - Friday, May 15, 2009

On the heels of Chrysler’s mass dealer terminations, General Motors followed suit Friday with 1,100 cuts of its own, but the GM dealers will have until late 2010 to wind down their businesses.

The automaker did not make its list public — GM is not in bankruptcy as Chrysler is — but sent the notices to the affected dealers individually, allowing them to decide on their own whether to make the news public.

“These were not termination notices but notices of future plans, that we didn’t plan on renewing their sales and service agreements when they expire in the fourth quarter of 2010,” said Mark LaNeve, GM vice president of sales service and marketing.

GM will follow up with the dealers in June after it makes a decision on whether to file for bankruptcy protection, he said.

“This has been a difficult process. We took it very seriously. I know many of those receiving the letter today personally,” Mr. LaNeve said. “It’s just a move that perhaps people could argue should have been taken years ago.

“What is critical is that we have a healthy, viable dealer network that can attract the best operators and can attract investment,” he said.

The affected dealers are those with low profit margins or sales volume, he said. “Unless they haven’t been paying any attention at all, this should not come as a surprise to them.”

Hummer, Saturn and Saab dealers will receive an update in “the next week or so” on GM’s plans to sell those brands, he said. “The vast majority will be offered the opportunity to continue with GM,” Mr. LaNeve said.

The cuts announced Friday are part of the company’s plan announced last month to eliminate more than 2,600 dealers by 2010. The remaining cuts will be achieved by closing Saturn and Hummer dealerships, along with 400 dealers that the company expects will close voluntarily. Another 500 would be consolidated into other dealerships.

The GM dealership reductions are likely to have a much greater impact on franchise owners than Chrysler’s cuts. Many Chrysler dealers sell other brands and will stay open after losing their Chrysler franchises, but a large number of GM dealers sell only GM vehicles. If their franchises are revoked, they run a greater risk of closing for good.

A hearing is scheduled for June 3 in U.S. Bankruptcy Court in New York for the judge to determine whether to approve Chrysler’s motion to fire its dealers.

To remake itself outside of bankruptcy court, GM must persuade its bondholders to swap $27 billion in debt for 10 percent of its risky stock. In addition, GM must work out deals with its union, close factories, cut or sell brands and shutter dealers.

Swapping its bond debt for equity may be GM’s most difficult task. The company is trying to get 90 percent of its bondholders on board for the so-called debt-for-equity swap. A committee representing the bondholders has rejected the swap, saying it unfairly favors the government and the United Auto Workers union. They submitted a counteroffer seeking a 58 percent ownership stake, which the automaker rejected.

Shares of GM were trading at $1.09, down 5 percent, at midday Friday.

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