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.
Some 96 percent of 3,500 dealerships GM wants to retain have agreed verbally or in writing to work with the automaker and 90 percent of those whose franchises are ending have signed or verbally agreed to wind-down terms, GM CEO Fritz Henderson told a House of Representatives subcommittee.
The dealerships with which GM wants to maintain a relationship had until Friday to accept terms that the automaker said were aimed at streamlining its 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 Deputy Chief Executive Jim Press told the panel Chrysler had sold or redistributed all of the vehicle inventory from the 789 dealers it terminated in bankruptcy. Chrysler had offered no appeals.
Some dealers have said Chrysler applied severe pressure earlier in 2009 to buy vehicles even though sales were weak and the automaker's prospects were fast deteriorating. Chrysler filed for bankruptcy on April 30.
Lawmakers asked Press about a phone call in which he told dealers that Chrysler would have a long memory if they did not help the manufacturer.
I would never threaten a dealer, Press said.
Chrysler plans a network of about 2,300 U.S. dealerships under its newly constituted company. Italy's Fiat SpA completed a takeover of Chrysler earlier this week.
House and Senate members have introduced legislation to force changes in how GM and Chrysler handle the dealership cuts, which dealers estimate will cost 100,000 jobs. The automakers believe many of the dealerships will survive in other forms, such as by selling used cars.
Lawmakers have asked the Obama administration's autos task force to intervene in the disputes. The U.S. government holds an 8 percent stake in Chrysler Group and will hold a majority control of GM when that sale is completed.
Representative Bart Stupak, chairman of the Energy and Commerce subcommittee on oversight and investigations and a Michigan Democrat, said GM and Chrysler's viability should not come at the expense of reputable and productive dealers.
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, Stupak said.
GM plans to eliminate 1,280 U.S. dealerships from its network through October 2010, leaving the company with at least 3,500. The wind down of the franchises would take place over the next 17 months and would include some compensation.
Even with these cutbacks, GM will still have the largest dealer network in the country, Henderson said.
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.
Dealers and dozens of lawmakers have criticized Chrysler and GM for what they consider overly aggressive restructuring.
Auto executives have said the closing dealerships may have had several issues such as low sales volume, poor customer service, locations too close together or in areas no longer seen as desirable to the automakers.
In 24 hours, I was told that everything my family and I had worked for 84 years would be taken away, Frank Blankenbeckler of Carlisle Chevrolet Co in Waxahachie, Texas, said choking back tears. Blankenbeckler received closure notices from both GM and Chrysler over two days in May.
The Texas attorney general on Friday objected to GM's sale plan, saying the new franchise agreements substantially changed the dealerships' relationships with GM, stripped their right of protest, could require them to take inventory and denied them the right to market other brands in violation of state law.
GM seeks this court's seal of approval for its abusive and oppressive conduct, the Texas objection filed with the U.S. Bankruptcy Court states. This court should not, however, condone GM's strong arm tactics.
Press and Henderson have said the decisions on the Chrysler and GM dealership networks were difficult.
We have taken every step to make this a soft landing for dealers, Press said.
(Reporting by Mari Saito, John Crawley and David Bailey; Editing by Gerald E. McCormick, John Wallace and Leslie Gevirtz)