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The Honolulu Advertiser
Posted on: Saturday, May 16, 2009

Fate of local GM dealers unclear in cutback of 1,100 franchises


Advertiser Staff and News Services

Hawaii news photo - The Honolulu Advertiser

General Motors yesterday was in the process of telling about 1,100 dealers their franchises will be terminated late next year. It's not known whether this GM dealership in Burlingame, Calif., is on the chopping block.

PAUL SAKUNA | Associated Press

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NEW YORK — General Motors yesterday told about 1,100 of its dealers — one in five — that they would be dropped by late next year, adding to the economic pain radiating from the beleaguered Detroit automakers to cities and towns across the country.

Including Chrysler's decision a day earlier to eliminate a quarter of its own, about 1,900 dealerships — many pillars of their communities and heavy advertisers for local media — learned in a matter of 48 hours that they would be forced either to sell fewer brands or close altogether.

The GM dealerships will be eliminated when their contracts end late next year.

GM would not reveal which dealers will be eliminated. FedEx letters bearing the bad news began arriving yesterday morning at GM franchises around the country. The letter states that dealers had been judged on sales, customer service scores, location, condition of facilities and other criteria.

It couldn't be determined yesterday if any General Motors dealers in Hawai'i had received the franchise cancellation letters.

Several Hawai'i General Motors dealers said they believed they were in the clear when it came to receiving the franchise renewal letters. But not all responded to Advertiser calls.

Others said they hadn't received a letter but didn't know if the overnight letters would be delayed getting to Hawai'i. That's because the express letters sometimes take two days to be delivered when sent from the Mainland.

At least one dealer, Nick Cutter of Cutter Chevrolet and Cutter Pontiac Buick GMC, said he believed his dealerships were safe because they were the top performers in the state for GM.

"We're in good shape," Cutter said.

David Rolf, executive director of the Hawai'i Automobile Dealers, said he understood about half the franchises not being renewed sold fewer than 35 vehicles a year.

"Nobody here is at that level," Rolf said.

While GM doesn't own the dealers, the company says its network is too big, causing dealers to compete with each other and giving shoppers too much leverage to talk down prices and hurt future sales.

Many dealers vowed to fight, first through a 30-day company appeal process, then possibly in court.

GM's dealers are protected by state franchise laws, and the company concedes it would be easier to cut them if it were operating under federal bankruptcy protection. GM says it's trying to restructure outside of bankruptcy because of the stigma of Chapter 11.

Both GM and Chrysler are scrambling to reorganize and stay alive in a severe recession that has pummeled car and truck sales for U.S. automakers, which had already been losing market share to foreign companies for decades.