Wednesday, 13 May 2009 08:53

GM preparing to cut 40% of dealer network

GM plans to tell approximately 1,000 dealerships that they are being dropped for not meeting standards for capitalization and profitability. GM will send letters to these "underperforming" dealers for arrival May 15, reported Automotive News.

The letters will notify dealers that their franchise agreements will not be renewed when they expire in October 2010. GM will detail the dealership's deficiencies regarding GM's sales and service agreements including customer satisfaction scores, profitability, sales effectiveness and working capital. A GM spokeswoman said: "Most dealers know who they are if they're underperforming in CSI, profitability, capitalization and sales effectiveness. There are scores they need to meet or exceed to be retained."

GM plans to cut about 2,600 dealerships by the end of 2010. In 2008, GM had 6,246 U.S. dealerships. In addition to the 1,000 that GM will cut in the letter campaign another 500 dealerships will close when GM sells the Hummer, Saab and Saturn brands. GM also has 35 standalone Pontiac dealerships that will go away when it phases out Pontiac by year-end 2010.

GM expects to lose about 500 more dealerships through attrition in 2009. The remaining 500 or 600 dealerships of the 2,600 GM plans to cut will be closed through consolidations and through buy-sell negotiations.