GM, Chrysler Urban Dealers Likely to See Bulk of Cuts (Update1)
By Katie Merx
May 13 (Bloomberg) — General Motors Corp. and Chrysler LLC dealers in urban areas, where auto retailers are most numerous, probably will suffer the most when the companies reveal this week which stores will close.
Chrysler will disclose tomorrow which dealers it intends to retain, according to court documents. A day later, GM will notify 1,000 to 1,200 dealers whose franchises won’t be renewed, Susan Garontakos, a spokeswoman, said yesterday.
“They are going to be hit a lot harder in the urban areas,” said Paul Melville, a principal at Grant Thornton in Chicago. “That’s where you’ve got dealers almost on top of each other. Take somewhere like Detroit: If there’s 10 dealers in a 10 mile radius and you take five of them out, the customer is still going to drive for the brand he wants.”
GM, facing a U.S.-imposed June 1 bankruptcy deadline, and Chrysler, which filed for bankruptcy protection on April 30, want fewer dealers so those remaining will be more profitable.
GM, based in Detroit, will deliver letters May 15 to dealers whose stores fail to meet criteria such as sufficient working capital, sales or customer-satisfaction levels, explaining that the automaker will not renew their franchise agreements when they expire this year or in 2010, Garontakos said.
Steeper Cuts
The largest U.S. automaker said last month it plans to shrink its dealer network to about 3,600 from the 6,200 outlets it operated at the end of last year as part of the restructuring plan it presented to the Obama administration.
GM had a plan last year to trim its dealer body by 1,800, and Auburn Hills, Michigan-based Chrysler had planned to cut dealerships in metro areas by as much as 50 percent. The U.S. government, which provided emergency financing to both automakers, found those earlier targets insufficient. Now GM plans to cut its dealer body by 2,600 by the end of 2010. And Fiat SpA, not Chrysler, will decide which dealers will remain with the automaker after bankruptcy.
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