Nearly all dealers agree to work with new GM: CEO

Washington: All dealers asked to do business with the new General Motors Corp after bankruptcy have agreed to do so. 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.

Chief Executive, Fritz Henderson, told a House of Representatives sub committee that 96 per cent of the estimated 3,500 dealers. The company wants to retain representatives, they have so far agreed verbally or in writing to participate in the new GM.

He said 90 per cent 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 on 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.

Chrysler Group LLC President Jim Press told the panel that Chrysler has sold or redistributed 100 per cent 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 Jim 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 read. 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 per cent of Chrysler. Henderson said the task force required a competitive dealer network but left details up to management. Chairman of the Energy and Commerce subcommittee, Representative Bart Stupak 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 time frame 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. GM plans to close 1,280 US dealerships through October 2010, leaving the company with at least 3,500 showrooms and a retail market share of about 17 per cent, 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 US 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. Blankenbeckler received closure notices from both GM and Chrysler over two days in May.

"Bankruptcy is not a spectator sport," said Jim Press.

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 on June 9 is costly and offers no compensation.

"We have taken every step to make this a soft landing for dealers," said Press. GM expects dealers to sell inventory over the next 17 months and plans some compensation.