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March 10, 2010

US: GM hopes to settle with axed dealers

General Motors is contacting dealers planned to be dropped from its sales network to discuss settlement offers in an effort to avoid drawn-out arbitration with hundreds of franchise owners, a media report said.

General Motors is contacting dealers planned to be dropped from its sales network to discuss settlement offers in an effort to avoid drawn-out arbitration with hundreds of franchise owners, a media report said.

About 440 GM franchises are still due to be terminated after the company announced last week it would reinstate 661 dealers, Dow Jones reported.

The automaker planned to drop around 2,000 US dealers as part of its government-funded bankruptcy reorganisation last year but lawmakers, on behalf of local businesses, forced GM to first offer arbitration to dealers who wished to stay in business and about 1,100 dealers took that option.

Dow Jones said GM was now in a better position to offer cash settlements than it was a year ago, when it was losing billions and headed into bankruptcy. Company executives also have since said the process used to weed out dealers was flawed and didn’t properly consider such factors as location and customer loyalty.

“We want to repair our relationship with dealers and have stability,” GM spokesman Dave Roman told Dow Jones. He added the automaker has begun the process of contacting dealers to arrange meetings to discuss potential settlements.

GM had now contacted all dealers it planned to reinstate and was sending out new contracts to those stores,  but it could take months for dealerships to begin receiving new shipments of cars and trucks.

GM had aimed to cut about 40% of its 6,246 outlets, the report noted, with some of those closings representing brands that GM is phasing out or selling – Hummer, Saab, Saturn and Pontiac. GM now expects to end up with about 5,000 dealers for its remaining Chevrolet, Cadillac, Buick and GMC brands, Dow Jones said.

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