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The Day After - GM Dealers Get Letters
Today, June 2nd, was the day that 5969 dealers received FedEx packages of either good news, a Participation Agreement (OK, it's not-so-bad-news, your franchise agreement may be renewed), or bad news, a Wind-Down agreement and payment of some monies to help you liquidate your inventories.
My phone started ringing early this morning. Five friends/clients all with at least one Wind-Down, and some with Participation Agreements. Shortly after the calls I had copies of the agreements forwarded to me. Out of confidentiality I can't post copies here of the documents, but they weren't short.
Bottom line is that dealer have until June 12th to sign and return the documents to GM. They were absolutely as heavy handed as I predicted they would be in yesterday's blog. Incorrigible.
Wind-down dealers may purchase no more vehicles from GM, but must stay in business through at minimum January 2010, and up to October 31, 2010. They must continue to service and honor warranties. However, they may not return any parts - whether currently owned, or those bought from GM during the 18 month transition. Yeah, that's right. Order a part, have GM ship you the wrong one and you own it, regardless. The RIM program is gone. I have one client that has about $140 in GM parts in inventory. That is going to leave a mark. His Wind-Down incentive? $36K.
The smallest package I heard today was for a nearly new store in a smaller market that is losing Pontiac and Cadillac. (Cadillac was an addition from May 15th). $12,000 is all they get.
There are a number of friends and clients that I have not talked with today. I truly hope no news is good news, but based on the heavy handedness put forth by GM for those that get to keep their franchises (if they comply) there may not be any good news. Dealers are being asked to blindly agree that they "must substantially increase its sales of new [GM vehicles]" and that the dealer will be assigned goals each year that they must meet. (Sidebar: Has a manufacturer ever been overly optimistic on what their market share should be?) They must willing to use their best efforts to "stock sufficient additional motor vehicles" in order to hit these assigned sales goals. MORE INVENTORY?! Have you seen the seven, eight or nine month supplies that some dealers have? They want them to take more?!
No duals will be allowed with non-GM franchises. Expect to have facility upgrades mandated. (That has worked so well for Toyota dealers over the past 12 months...) Oh yeah...one last thing. You agree to indemnify GM and agree not to file suit.
Yes, you may call me cynical, but I am not sure which side got the worse end of the deal. OK, I have repeatedly stated, it is just incorrigible to have your independent profitable business terminated for you, so sure, they are getting the worse end, but I am not sure I would run out and celebrate for the other group. This is the ultimate "shotgun wedding."
Finally, what was my advice? It was simple - sign the agreements. If you don't, you get to pay an attorney to go to battle. Then, should you win the battle (and I assure you it won't be cheap), you still lose the war. You will be grouped with the Old GM assets (what few there are) and all the old liabilities. As wrong as it is, GM's offer is still better than what is being offered terminated Chrysler dealers. It at least gives them some time to plan to do something and a modicum of compensation.
For the rest, take it or leave it. (Wink-wink - we guess it is kind of hard to leave that big expensive facility we had you build.) I doubt the winners will ever forget the gun that GM has put to their heads. Of course GM says they want transparency and to be a good partner. That looks like lipstick on a pig to me...and this is one big pig contract. Sounds like to me they have been associating with some career politicians too long already.
My phone started ringing early this morning. Five friends/clients all with at least one Wind-Down, and some with Participation Agreements. Shortly after the calls I had copies of the agreements forwarded to me. Out of confidentiality I can't post copies here of the documents, but they weren't short.
Bottom line is that dealer have until June 12th to sign and return the documents to GM. They were absolutely as heavy handed as I predicted they would be in yesterday's blog. Incorrigible.
Wind-down dealers may purchase no more vehicles from GM, but must stay in business through at minimum January 2010, and up to October 31, 2010. They must continue to service and honor warranties. However, they may not return any parts - whether currently owned, or those bought from GM during the 18 month transition. Yeah, that's right. Order a part, have GM ship you the wrong one and you own it, regardless. The RIM program is gone. I have one client that has about $140 in GM parts in inventory. That is going to leave a mark. His Wind-Down incentive? $36K.
The smallest package I heard today was for a nearly new store in a smaller market that is losing Pontiac and Cadillac. (Cadillac was an addition from May 15th). $12,000 is all they get.
There are a number of friends and clients that I have not talked with today. I truly hope no news is good news, but based on the heavy handedness put forth by GM for those that get to keep their franchises (if they comply) there may not be any good news. Dealers are being asked to blindly agree that they "must substantially increase its sales of new [GM vehicles]" and that the dealer will be assigned goals each year that they must meet. (Sidebar: Has a manufacturer ever been overly optimistic on what their market share should be?) They must willing to use their best efforts to "stock sufficient additional motor vehicles" in order to hit these assigned sales goals. MORE INVENTORY?! Have you seen the seven, eight or nine month supplies that some dealers have? They want them to take more?!
No duals will be allowed with non-GM franchises. Expect to have facility upgrades mandated. (That has worked so well for Toyota dealers over the past 12 months...) Oh yeah...one last thing. You agree to indemnify GM and agree not to file suit.
Yes, you may call me cynical, but I am not sure which side got the worse end of the deal. OK, I have repeatedly stated, it is just incorrigible to have your independent profitable business terminated for you, so sure, they are getting the worse end, but I am not sure I would run out and celebrate for the other group. This is the ultimate "shotgun wedding."
Finally, what was my advice? It was simple - sign the agreements. If you don't, you get to pay an attorney to go to battle. Then, should you win the battle (and I assure you it won't be cheap), you still lose the war. You will be grouped with the Old GM assets (what few there are) and all the old liabilities. As wrong as it is, GM's offer is still better than what is being offered terminated Chrysler dealers. It at least gives them some time to plan to do something and a modicum of compensation.
For the rest, take it or leave it. (Wink-wink - we guess it is kind of hard to leave that big expensive facility we had you build.) I doubt the winners will ever forget the gun that GM has put to their heads. Of course GM says they want transparency and to be a good partner. That looks like lipstick on a pig to me...and this is one big pig contract. Sounds like to me they have been associating with some career politicians too long already.
Comment
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Comment by Zane Gober on June 11, 2009 at 10:10am -
The dealer body has and always will be the strength of the auto industry, however, everything that the manufacturers (GM and Chrysler) and Congress has done, runs opposite of that. After all is said and done, the dealers will still rise to the top. It is unfortunate that the manufacturers did not listen to their dealers many, many years ago, instead listening to unions and producing vehicles based on those contracts. The government wants to be involved, how about getting the banks to loan out some of the $700 billion dollars they gave them. They sure did not tell banks what to do, yet they want all the say on the money given to auto industry......
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Comment by Thomas Langas on June 4, 2009 at 10:33am -
Government & Union owned auto manufacturing.....Sorry, I had a comment, but that phrase just left me speechless, and in a cold sweat.
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Comment by Allen S Burks on June 3, 2009 at 9:39pm -
Thank God I resigned my Chevrolet franchise in '07! If I had stayed, in a 40 year old facility, I would have been on the hit list. Even with good sales numbers and CSI! I was probably one of the "cleanest" dealers GM ever had. If I had decided to stay viable, I would be completely broke today instead of simply unemployed. GM has been asleep since the Vega, Chevette and Citation. The imports are absolutely going to take more and more market share away simply due to the publics assumed quality and resale value of their products. God's speed GM. I grew up with you, I knew you, and I'll miss you. I am a Chevrolet loyalist through and through. But, this time I just don't know about your future...
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Comment by Joe Pate on June 3, 2009 at 5:44pm -
My comment wasn't intended to insult anyone or the hundreds of GM dealers being eliminated. I realize that there will be thousands of employees losing their jobs and it will effect everyone's families as well. However, there is not a thing that we can do about the situation. I don't agree with any of it.
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Comment by Gary May on June 3, 2009 at 1:51pm -
I'm going to agree with Tom. Essentially franchise agreements are null and void in the bankruptcy and this is the hand that's been dealt. Each franchise must operate as their own entity. The fact that you've been able to survive without doing that is not the most capitalistic of operation but it's the way the OEMs have allowed business to be. If you're going to stay in business, you have to be IN business and not depend on anyone or have your eggs in one basket.
No matter how much associations, including NADA, try to help, it is us, the business owners, that must depend on our own actions. Government intervention has NEVER been good in business, ever. It's done, don't cry about it. Don't wait, don't 'try to see', don't look for a handout or a guarantee. Operate your businesses as if you life depended on it regardless of who/what you do business with.
Our job is to connect with consumers, not wait for the factory. Our job is to manage our businesses, not let someone else manage it for us. Our job is to achieve the greatest amount of success we allow ourselves to achieve. Are there huge obstacles right now? I don't know, that's up to you. Has business changes? Unarguably it has. If you want to cry a river, there is a massive line of those people (they won in November). If we're going to be the best in business, we have to act like it, be proud of what you do, give people reasons to buy (not convince or trick them), execute on everything we say we'll do ('cause we're in charge of us) and fight like hell for what you have.
My two point one cents (a little less than Tom's ;-)
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Comment by Tom White Jr. on June 3, 2009 at 1:39pm -
Joe,
While I appreciate your gung ho attitude and enthusiasm, no amount of positive attitude is going to make the challenges this industry faces go away entirely. Without a worthwhile discourse on what intervention by the Federal government actually means, we cannot make intelligent business decisions.
Forums such as this served as catalysts for some of the "good news" that has come out of this mess. See the story on Bob and Mary Cockerham for a good example. I share your frustration with all of the bad news and try my best to keep negative thoughts from permeating our organization. The bottom line is that a great many of quality dealers who employed thousands of people are going out of business. It could happen to you. It could happen to me. It could happen to just about anyone.
Unfortunately, in today's environment, I fear turning a blind eye to the challenges we face is a recipe for disaster.
My two point five cents per usual.
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Comment by David Ruggles on June 3, 2009 at 1:11pm -
http://www.c-span.org/
At 2:30PM EDT TODAY you can watch the Senate hearings re: Dealer closures. John McEleney, NADA President this year will testify along with Jim Press from Chrysler. It bears watching!
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Comment by John Fuhrman on June 3, 2009 at 12:46pm -
How is it possible that a company losing money for consecutive years, taken over by the government and still able to go bankrupt can tell a profitable INDEPENDENT business how it will operate. Why did the government give an abject failure power over successful operators (Oh right, I forgot, it's the government and they're here to help.)
The real solution is to act like all the mothers did back in the 1960's when beef prices started going through the roof. Before equal rights and women's lib and withotu the Internet, these moms got together and said, No More Beef! It took less than two weeks before the Industry saw the light.
The government is wrong. The factory is even more wrong. But, you put enough union jobs in jeopardy by NOT ordering cars, they will listen.
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Comment by Joe Pate on June 3, 2009 at 12:46pm
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socialism, lobbyists, the federal government, incorrigible, coffins, chavez.....in one ear and out the other...when i come to work...i come to win...let's cut out the political b.s..my condolences to the unfortunate gm dealers who got "the letter". let's move some iron!
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Comment by Michael Abrams on June 3, 2009 at 11:49am
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Nothing the government (especially the current make up of our government) ever touches turns out to be good. Maybe this is the coffin that needs to be built before people stop giving these socialists more power.
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