Don Brown Chevrolet said today it had received word that it is not among the area General Motors dealerships that will lose its franchise agreement.
Rumors abounded today as word about GM’s plans to end some 1,100 franchises in an effort to streamline its business and avoid bankruptcy. The corporation has already said it will end the storied Pontiac brand and is looking to sell other lines including Saturn.
At Don Brown Chevrolet on South Kingshighway word came down Friday that the dealership would be spared, said Greg Flotte, sales manager. Don Brown’s Chrysler dealership also on Kingshighway has already closed due to struggling sales. Many city dealerships have lost sales in competition with suburban auto malls.
"This won’t affect us directly. We’re not on the list," Flotte said.
Other dealerships were reticent today as word spread. Employees at McMahon GMC Pontiac on Kingshighway and at the parent office said they didn’t know if their business was affected and couldn’t comment anyway. General Manager John Schicker also couldn’t reached.
At Chris Auffenberg Chevrolet in Kirkwood, general sales manager Louie Trevino said, "There’s always rumors. Nothing is definitive and we haven’t been told anything yet."
(For more on this story, read Sunday’s Post-Dispatch or return to STLtoday.com)
Our earlier story:
By Angela Tablac
Glenn Bruckert knew bad news would come soon to his Chevrolet dealership, so he took a proactive step earlier this week. He sent General Motors Corp. a letter on Wednesday, asking to end the franchise agreement at his Bunker Hill location.
On Friday, his action was validated. He received a notice from GM saying his franchise would not be renewed.
"I knew it was coming, so I beat ‘em to the punch," said the owner of Bruckert’s Chevrolet and a former Bunker Hill mayor. "The GM I knew is gone."
Still, he said, "when you’re sentimental about something, it’s hard to give up."
GM told about 1,100 "underperforming" GM dealerships Friday that their franchise agreements would not be renewed late next year. The cuts came just one day after Chrysler LLC said it would eliminate 789 franchise contracts with dealers, including 10 contracts among nine St. Louis dealers.
But it’s unclear how many GM dealerships in the St. Louis area are affected. Phone calls to more than two dozen local GM dealers drew few responses.
Unlike Chrysler’s list, which the automaker had to make public in bankruptcy court, GM did not release the names of affected dealerships. It let dealers decide to reveal if they were affected.
"We’re in a different situation than Chrysler, where this is not a matter of public record," a GM spokesman said Friday in a conference call.
GM is sprinting toward a June 1 deadline to restructure or file for bankruptcy reorganization. The automaker needs to trim its dealership network to account for the drop in sales and ensure dealers remain profitable, said Mark LaNeve, GM’s vice president of sales, service and marketing.
Beside the underperforming dealers, the automaker plans to trim its ranks by ending or divesting brands, such as Saturn, consolidation and attrition. In total, it plans to drop 2,600 dealerships by the end of next year, leaving GM with about 3,600 dealers.
LaNeve said GM based decisions on sales numbers, profitability, customer service ratings and other performance-related factors. The 1,100 dealerships sold just 7 percent of GM’s 2008 U.S. sales volume, he added.
Once their franchises are gone, dealers will no longer be able to sell new GM vehicles or perform warranty repair.
APPEAL POSSIBLE
Affected dealers learned their fate from overnight FedEx letters that began arriving Friday morning, GM said. The letter stated that GM did not see a "productive business relationship" with the dealer, according to a copy obtained by The Associated Press fast payday loans.
But it also left dealers with some hope.
"Please understand that our planning in this regard is not finalized, and we are prepared to give you until the end of the month to submit any information you would like us to see," the letter said, according to the AP.
GM spokesman Terry Rhadigan would not provide a copy of the letter, but he confirmed that dealers can submit appeals via a website. Rhadigan said he couldn’t estimate when the appeals process would be completed and the list finalized.
Dealerships would not immediately stop their new-vehicle sales but rather wind down operations and sell off inventory by the end of their contracts. The 1,100 dealerships right now have about 65,000 vehicles in inventory, according to GM.
And they won’t necessarily close. Some may continue to operate by selling other automakers’ brands or focusing on used-vehicle sales.
That’s what Bruckert, who has the Bunker Hill dealership, plans to do. His business has been associated with GM since 1938, but Bruckert says he can survive on selling used vehicles and auto service.
GM considers its wind-down approach to be better than terminating franchise contracts.
Some state franchise laws, like those in Missouri, would require GM to buy back existing inventory and possibly pay damages if it ended the agreements early, said Stephen Rovak, a St. Louis partner with Sonnenschein Nath & Rosenthal LLP.
Letting the contract expire, however, can be more complex. Dealers and GM likely will argue over the portion of Missouri law that says it’s unlawful to "terminate, cancel or refuse to continue any franchise without good cause," said Rovak, who specializes in franchise law.
GM faced a legal headache in 2000, when it decided to ax the Oldsmobile brand and offered buyout packages to its 2,800 dealers. Some sued the company. Ultimately, the automaker paid dealers more than $1 billion.
BANKRUPTCY SPEEDUP?
A bankruptcy filing — which analysts and even GM Chief Executive Fritz Henderson say is more likely than not — could muddy the outcome even more.
In the conference call, LaNeve said a filing would not change the number of dealers to be cut.
"Our plan’s the same, inside or outside bankruptcy," he said.
But it would be easier for GM, in bankruptcy, to speed up the dealership cuts, said Aaron Bragman, an auto industry analyst for IHS Global Insight. Chrysler, for example, expects to complete the sale of its best assets within 30 to 60 days of its April 30 bankruptcy filing and will end its dealership agreements by June 9.
GM’s cuts will impact communities in St. Louis and nationwide by bringing losses in jobs and local tax revenue.
More than 63,000 dealership employees nationwide will be affected by the terminations announced Friday, the National Automobile Dealers Association estimated.
The effect on consumers, meanwhile, is mixed. Fewer new-vehicle dealerships means buyers won’t be able to shop for the best price among several dealers in the same area, Bragman said.
But consumers may find good deals, even on used vehicles. As dealerships close and their new vehicles are dispersed among remaining dealers, there will be an excess of new GM vehicles on lots, which also put pressure on prices of used cars and trucks, said Mark Rikess, chief executive of the Rikess Group, a retail auto consulting firm in Hollywood, Calif.
Rikess — who said he’s advised more than 100 GM and Chrysler dealerships facing closure — is telling his clients to sell down their used vehicle inventory before the influx of new cars. Even if that means selling them at a loss, he added.
Greg Jonsson and Christopher Boyce of the Post-Dispatch contributed to this report.
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