General Motors Co. plans to reinstate 661 dealers and may enter arbitration with as many as 400 outlets as the biggest U.S. automaker attempts to stem declines in domestic market share.
GM offered franchise agreement letters to the dealers, North America President Mark Reuss said yesterday in a conference call. The company has about 5,500 outlets.
"We are eager to restore relationships with our dealers," said Reuss. "The arbitration process creates uncertainty in the market. Issuing these letters of intent is good for our customers, our dealers and GM."
The Detroit-based automaker is trying to increase U.S. sales and market share while trimming four of its eight brands. Chief Executive Officer Ed Whitacre named Reuss, 46, to the post in December in a shuffle of top managers.
GM accounted for 19.9 percent of U.S. sales of cars and light trucks last year, a drop from 22.3 percent in 2008, according to Autodata Corp. in Woodcliff Lake, New Jersey. Ford Motor Co. beat GM in monthly sales in February for the first time since 1998.
The dealer reinstatement plan "is a good thing," said Maryann Keller, president of Maryann Keller & Associates in Stamford, Connecticut. "There were false economics in terminating that many dealers. If they restore what they've lost and put back into business dealers that were financially viable, then they will gain sales."
Dealer Response
The National Automobile Dealers Association said the plan was "a significant move forward."
"We appreciate the good-faith effort that GM is showing and hope that this carries forward in its continuing settlement and arbitration discussions with the remaining wind-down dealers," association Chairman Ed Tonkin said in a statement.
Reuss said last month that repairing dealer relations is his most important priority. On March 2, he announced changes to his North American leadership team that reduced management layers.
The company began to re-evaluate the closing of 1,100 retailers after Congress passed a law in December to give GM dealers who lost or were scheduled to lose franchises the right to hearings. The binding arbitrations may reverse the automaker's termination decisions.
"It was going to be virtually impossible to take 1,100 cases and arbitrate everything in a 120-day period," GM North America Vice President of Marketing Susan Docherty said during the call. Decisions were made based on the company's criteria, the time they had to handle the cases and how the company believed arbitrators would look at each dealership, she said.
Chrysler, which targeted 789 dealers for closing, is also bound by the law. Chrysler's arbitration isn't expected to begin until late this month or early April, said Kathy Graham, a spokeswoman.
-Source, Bloomberg Business Week, Katie Merx
