Warning…GM Notifications May Contain Requirements Hazardous to your Dealership’s Health

June 2, 2009
GM on EImage by Mike Licht, NotionsCapital.com via Flickr

Letters are arriving at GM dealerships today via FedEx notifying them that their franchise agreement will be assigned to the new government owned entity. The initial reaction of dealers receiving such letters is a big sigh of relief. To no one’s surprise, these letters come with some expected stipulations such as the need for additional capitalization, and/or facility upgrades. There is, however, somewhat of an unexpected surprise for some dealers. Those GM dealers dualed with non-GM franchises may be required to give them the boot.

This requirement presents dealers with a difficult dilemma. Although many dual dealers have separate showrooms, they often share service, parts and administrative functions, and the math just doesn’t work if surgically separated. It’s like splitting conjoined twins that share vital organs.

In theory, the separate GM operation might work if the dealer reduction ultimately creates more business for each dealer, but this remains to be seen. In the meantime, these dealers must sign and submit a commitment in the next 10 days, or else have their GM franchise heaped on the junk pile of the bankruptcy trash.

If I had to speculate I would say that some dealers will say goodbye to their General Motors franchise in favor of their noncompliant competitive brand. Other dealerships will be forced to sell their second and/or third tier brands to non-GM dealers. Those non-GM dealers who pick these brands up will further consolidate their retail base in their respective markets by broadening their product offering. One really has to question whether this requirement strengthens or weakens the future General Motors dealer and brand.

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