OK, I just sat through the 41 minute GM media conference call. It told me nothing that I didn't already know, but it certainly gave Mark LeNeve the opportunity to do some damage control in the media.

The bottom line is that GM gave 1100 dealers notice today that their sales and service agreements will not be renewed in October 2010 when the existing agreements expire. He said the intent was to communicate this with dealers today so that they and GM could enjoy an "orderly wind down" - unlike Chrysler dealers. He stated that GMAC floors the majority of the GM dealers and that if they were to terminate voluntarily, GMAC would have to buy back the inventory and that it would impair GM's cash flow and flood them with 65,000 vehicles (8% of the total of on ground inventory). He also indicated that even though dealers didn't get a letter today, another 10% will not be renewed in 2010.

LaNeve was very clear to say that this was not going to be like Chrysler's letter that went out yesterday giving Chrysler dealers 26 days to wrap up business, and to essentially fend for themselves.

That all is today.

LaNeve also said a second letter with more terms would go to the same dealers right after the first of June, which he admitted would be after GM know whether or not they will have to file for Chapter 11 Bankruptcy protection. (wink-wink)

Here's the scoop. LaNeve stated that this is going to happen whether in or out of bankruptcy court. He conceded that it might not be easy to do out of bankruptcy protection. (No kidding.) Even GM's CEO Fritz Henderson admits GM's filing is probable. If he is saying that, count on it. What this effectively does is put these 1100 dealers on notice that they have about 60 days to wrap up there GM business.

Why 60 days? Because that is about the length of time they will have before GM files for bankruptcy and when the protest period in the bankruptcy court will end (similar to June 9 for Chrysler). At that time, my guess is that the same fate that awaits Chrysler dealers will also await the dealers that received their notice. Additionally, we know that GM will no longer be bound by the sales and service agreement and that dealers - even though they may terminate BEFORE the filing - will not be able to force GM to buy back their inventory.

LaNeve repeatedly stated that they wanted a wind-down period. Perhaps that is possible IF the bankruptcy court approves it. If they don't, it is all over but the shouting. For a dealer that received a letter today to not take that to heart would in my opinion be a very serious mistake. If you haven't already called your attorney and accountant, today would be a good time to start. Additionally, if there is anything that I can do to help you in any way, please don't hesitate to call or write.

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Tags: GM, auto, bailout, general, gm, industry, motors, restructuring

Comments are closed for this blog post

Comment by Ben Misra (secondarypro) on May 16, 2009 at 7:55am
The one thing that nobody has mentioned is putting another 2000 used car dealers in the market.

What will that do to the auction values. Could you imagine another 10,000 cars going through your local auction next week, at retail value.

What about the value of GM or Chrysler cars. I don't even buy Chrysler, Pontiac or Saturn cars anymore because the lenders give me 70% of black book. (These will be future Daewoo cars).

Since very few lenders will sign used car dealers already and most local banks wont floor 2M dollars used car inventory at value ( most likely at 75% of value).

What dealer is going to be able to pay his new car dealership overhead.

Remember they will not be able to service new cars under warranty and the parts supply will slowly go away.

Used car dealers will also not be union.
Used car dealers get no co-op for advertising.

I see many, many beautiful empty buildings in the future..

Its hard to look for a silver lining...when there are no clouds.
Comment by Abiy M Berehe (Capt.) on May 15, 2009 at 3:24pm
Wow, even though I knew and felt this is what will transpire with GM when I left my last dealer , I did not in my wildest dream think I will say "May be it is time to change my Career". Well returning back to flying after 16 years ? What a sad ending..............................................! I love the Automotive business passionately. I would rather regroup my self before saying anything more.
Comment by David Ruggles on May 15, 2009 at 3:08pm
New vehicles from Detroit these days are truly nothing more than commodities, and in the commodities business "shelf space" is the essential.resource, and these idiots are voluntarily giving it up.

In reading the statements of Mark LeNeve he refers to "migrating our customers to other dealers." Those customers were created by the selling dealer! These factory guys have NEVER understood that its the personal relationship that gets the deal on large ticket items.

Not only are Dealers NOT expenses to an OEM, they are profit centers. What is going on defies all logic! Much of the "shelf space" will be taken up by Chrysler and GM competitors. There is a lot of "weight" associated with the "ill will" rejected Dealers and folks like myself are feeling. Having one's name and business published as "rejected and deficient" is the height of insult, not to mention the folks who are pushed into insolvency!
Comment by Gary D. Martin on May 15, 2009 at 3:05pm
A great many of the soon to be former GM dealers that find themselves in good cash positions will easily transform their facilities into used car "superstores". Others will be looking to other franchise opportunities, i.e. Toyota, Honda, Hyundai, etc. No matter what happens, once the comsumer emerges from their fear and malaise and banks once again begin lending the auto industry will recover.
Comment by Greg Goebel on May 15, 2009 at 2:40pm
The costs are minimal and even though the comments today were that these dealers represent just 7% of GM's sales there is no way that anyone can convince me that this is an economic issue. The last time I looked, 7% of GM's total sales are still darn important, and I don't believe that GM will retain even 50% of the sales being cut due to customer loyalties to dealers and the fact that many of those dealers have competing franchises to switch the vehicles to.
Comment by A Jay Gould on May 15, 2009 at 2:12pm
Gregg this is really good advice and you are trying, quite admirably,to make a dealer use common sense in this matter and get some good legal advice. I'm like you, once GM gets in BK it's a whole different ballgame and the judge is going to look at GM's pre bankrupt efforts very favorably, I think a dealers chance to fight this is slim and none and slim is on his way out of town.

Never in my 48 years in this business did I ever in my wildest imagination think somthing like this could happen. I'm still having a hell of time placing any cost to GM of a normal dealership,except field personnel and who needs them. I'm looking out the window and the rats havn't started building a raft yet but I have noticed some activity,help my thinking here.
Comment by Rickey Richardson on May 15, 2009 at 2:00pm
ITs sad but its only a matter of time for our friends in The Gm business......this could be catastprohic!
Comment by John Caudell on May 15, 2009 at 1:31pm
The bottom line here is, American companies can't be trusted. My kids won't be going to dealer candidate school.

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