Fritz Henderson, chief executive officer
of General Motors Corp, speaks to reporters
after appearing at the U.S. Bankruptcy Court in
New York,June 1, 2009. Reuters/Mike Segar
Virtually all dealers asked to do business with the new General Motors Corp after bankruptcy have agreed to do so, while the automaker will work through the weekend to weigh appeals from those that are being cut loose, the company's chief executive said on Friday.
Fritz Henderson told a House of Representatives subcommittee that 96 percent of the estimated 3,500 dealers the company wants to retain have so far agreed verbally or in writing to participate in the new GM. He said 90 percent of dealers whose franchise agreements are being terminated have signed or verbally agreed to wind-down terms.
The automaker had given dealers invited to stay on until Friday to accept terms aimed at streamlining the distribution and sales network and increasing market share.
Our dealership consolidation is not just about saving money, but about creating opportunity and revenue growth, Henderson said, adding it received 856 appeals from dealerships facing termination and reversed closure decisions for 45.
GM will consider appeals through the weekend, he said.
Chrysler Group LLC President Jim Press told the panel that Chrysler has sold or redistributed 100 percent of vehicle inventory from the 789 dealers it terminated in bankruptcy.
Unlike GM, Chrysler offers no appeals for dealers, some of whom have complained of severe pressure this year from the manufacturer to buy more vehicles even though Chrysler sales were weak and the company's prospects fast deteriorating.
Lawmakers asked Press about a phone call in which he purportedly told dealers Chrysler would have a long memory if they did not help the manufacturer.
I would never threaten a dealer, Press said.
Chrysler plans to operate about 2,300 dealers under its alliance with Italy's Fiat SpA, which closed earlier this week.
House and Senate members have introduced legislation to force changes in how GM and Chrysler handle showroom closures, which dealers estimate will cost 100,000 jobs.
Lawmakers have also asked the Obama administration to intervene with a White House/Treasury task force driving GM's and Chrysler's restructurings. The government will take a majority stake in GM post-bankruptcy and holds 8 percent of Chrysler.
Henderson said the task force required a competitive dealer network but left details up to management.
Representative Bart Stupak, chairman of the Energy and Commerce subcommittee on oversight and investigations, said he wants GM and Chrysler to become viable, but not at the expense of reputable and productive dealer affiliates.
I am concerned that the accelerated timeframe for dealership closures and the way in which dealers have been treated may actually damage the brands more than help them, said Stupak of Michigan, where GM and Chrysler are based.
GM plans to close 1,280 U.S. dealerships through October 2010, leaving the company with at least 3,500 showrooms and a retail market share of about 17 percent, assuming annual industry sales of 10 million units.
Even with these cutbacks, GM will still have the largest dealer network in the country, Henderson said, including rural areas -- a major concern of lawmakers on Friday and at a similar hearing last week in the Senate.
By comparison, Ford Motor Co operates 3,300 U.S. dealerships, and global sales leader Toyota Motor Corp of Japan has 1,200 in the United States.
Chrysler, GM and the autos task force have been criticized by some dealerships and dozens of lawmakers for aggressive restructuring.
In 24 hours I was told that everything my family and I had worked for 84 years would be taken away, said Frank Blankenbeckler of Carlisle Chevrolet Co in Waxahachie, Texas, choking back tears. Blankenbeckler received closure notices from both GM and Chrysler over two days in May.
Press and Henderson have said the decisions were difficult.
Bankruptcy is not a spectator sport, Press said.
Executives said dealers set to close may have low volume, weak sales or poor customer service or are not conveniently located. One affected dealer said he was profitable and highly rated, and another dealer challenged Press, saying the wind-down that began June 9 is costly and offers no compensation.
We have taken every step to make this a soft landing for dealers, said Press, adding that Chrysler had saved jobs.
GM expects dealers to sell inventory over the next 17 months and plans some compensation.
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