- The Washington Times - Saturday, May 16, 2009

On the heels of Chrysler’s mass dealer terminations, General Motors took the same road Friday with 1,100 cuts of its own.

Some Washington area auto dealers expressed frustration they had not received word of their fate by Friday afternoon.

“I haven’t heard anything from GM, but I feel in my bones that I will. I guess it will be [Saturday] for me,” said a clearly tired Jack Fitzgerald, owner of 11 dealerships in Maryland.

On Thursday he learned that Chrysler was terminating agreements with three of his local dealerships. Each of them, however, also sells other brands.



Like Chrysler, GM is thought to be targeting dual dealerships - those that sell brands from other manufacturers. All of Mr. Fitzgerald’s outlets are dual dealerships, with many selling imports as well.

“I have duals. They are after people with duals. They don’t want any more duals,” he said.

“I have sufficient franchises that I’m not going out of business,” Mr. Fitzgerald said.

GM did not make its list public - it is not in bankruptcy as Chrysler is - but sent the notices to the affected dealers individually, allowing them to decide whether to make the news public. The automaker has nearly 6,000 dealerships, and ultimately plans to terminate contracts with 2,600 of them.

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 targeted dealers will have until late 2010 to wind down their businesses.

As of late Friday, the three area automobile dealers associations had not released the names of any affected dealerships. The trade groups said they either hadn’t received word from local dealers or the dealers did not want to be identified, and some didn’t know.

“People are twisting in the breeze right now,” said Gerry Murphy, president of the Washington Area New Automobile Dealers Association.

Separately, Chrysler dealers are reportedly planning to sue the company. The law firm of Squire, Sanders & Dempsey is meeting with President Obama’s auto task force next week to ask for federal intervention, including financial assistance, the National Law Journal reported. The law firm claims that the action is unlawful under state franchise laws and that about 100,000 workers could lose their jobs.

GM dealers also are considered likely to sue.

“Under Maryland dealer franchise law, which is very similar to other states, nonrenewal is exactly the same as termination,” said Peter Kitzmiller, president of the Maryland Automobile Dealers Association. “A manufacturer can only terminate a deal if they have good cause, and good cause is not saying we have too many dealers.”

GM conceded it could be difficult to cancel the arrangements outside of bankruptcy, where a federal judge’s decision would supersede state law. Chief Executive Officer Frederick A. “Fritz” Henderson said Thursday that “it’s probable” the company will take that route.

The company said slashing dealers was painful, but necessary and arguably overdue.

“What is critical is that we have a healthy, viable dealer network that can attract the best operators and can attract investment,” Mark LaNeve, GM vice president of sales service and marketing, said on a conference call with reporters.

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.”

As many as 500 of the dealers sell only about 35 vehicles per year, Mr. LaNeve said, and therefore are not “economically viable.”

Hummer, Saturn and Saab dealers - of which there are 470 - will receive an update in “the next week or so” on GM’s plans to sell those brands, he said.

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

The full economic impact of the dealer reductions is not clear.

But as it did Thursday, the Treasury Department said the auto task force played no role in which dealers or how many dealers would be affected.

“As difficult as these announcements are … without the president’s intervention, the entire GM and Chrysler dealer networks could have been lost,” the Treasury statement said.

Mr. Kitzmiller scoffed at that claim, noting that GM’s February restructuring plan, rejected by the administration, did not call for any dealer cutbacks.

“Treasury didn’t have anything to do with it? They didn’t look at the list, but they said you have to cut a significant number,” he said.

Fairfax County will lose two Chrysler dealerships and an unknown number of GM dealers, but Sharon Bulova, chairman of the county Board of Supervisors, said “we’ll survive” because of the county’s diverse economic base.

“Any time you lose jobs, that creates a difficulty for individuals who work for the dealerships,” she said. The business licensing and sales taxes the county receives are a relatively small percentage of revenues, she said, “but it’s still something that concerns us and that we don’t want to see happen.”

The impact on property tax revenues is expected to be slight, Mrs. Bulova said, because most dealerships only lease their land. The landowners would still be obliged to pay property taxes.

Shares of GM closed at $1.09 on Friday, down 5 percent. In bankruptcy, common shares generally become worthless.

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