General Motors on Tuesday asked a bankruptcy judge to cancel 70 dealer contracts, a move that would remove last holdouts in the company’s push to close up to 2,400 US outlets by 2010.
The auto maker said the closings would eventually save around US$2.4bn a year in dealer subsidies, advertising support, incentive payments and other expenses, Dow Jones reported. GM sought to reduce by one-third its network of 6,000 car dealers, arguing the sprawling network included too many unprofitable and outdated stores that dragged on the company’s bottom line.
“A leaner, more profitable dealer network with higher annual vehicle sales per dealership is essential to reducing GM’s staggering dealer support costs and a critical component of helping to ensure the viability of New GM,” GM said in the filing.
GM has extended wind-down offers to more than 1,000 dealers it had marked to close, which would allow the stores to remain open until October 2010, but bar them from ordering more vehicles. GM said 98% of those dealers had accepted the offers.
The company reversed its decision on about 60 dealers after rigorous opposition from dealerships and many lawmakers who fought the closing plans. In deciding which dealers to close, GM said, it analysed each store’s sales, customer satisfaction scores, capitalisation and profitability.
In addition, GM targeted dealerships that sold fewer than 50 vehicles a year, those that had been unprofitable for three years in a row and those that sold non-GM brands under the same roof and also had poor performance, the report added.
GM’s approach to dealers differed from that of Chrysler Group which sought and received a court order to terminate 789 out of about 3,200 dealer contracts in bankruptcy court with no closing offer.
The contracts GM seeks to terminate cover 70 stores owned by 38 dealers, including chains in South Carolina, Alabama and Oklahoma, Dow Jones said.