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Hundreds of GM Franchises May Get a Second Chance. Saab? Probably Not.

Travis's picture




 

The 1,350 GM dealerships, which were allowed to stay open until October of this year, were targeted as part of an effort to dump poor performers and to better align the General's dealership base with a much lower consumer demand for autos, especially domestics like Chevy, Buick, GMC and Cadillac.

Many of the dealerships in question were often too close to each other, competing on price, on a product with such a thin profit margin these days anyway, to sell a domestic car, you're surviving on dealership "minis" or "flats" (small commissions of under $100, in some cases) or factory "spins" (small amounts of money offered to the salesforce as an incentive based on volume).  It sucks to sell these things, if you call it selling anyway.

Congress passed legislation late in '09 that forces GM and Chrysler Group LLC, which shed almost 800 dealers last year, to give franchises a chance to appeal closure decisions. 

CEO Ed Whitacre said GM had a "pretty arbitrary cutoff point" for shedding dealers, and that it probably made mistakes in getting rid of some of them according to an article written by the Associated Press.

According to Whitacre- "Hundreds of dealers..." (pretty assuring, no?); but it's a "substantial number."  Again, assuring?

When the franchises were revoked early last summer, GM officials said dealers were judged on the metrics of meeting sales goals, customer service scores, the condition of their buildings, etc, etc.  They are allowed to stay open through October of this year to sell their remaining inventories.

Pressure from dealership groups and lawmakers have led GM and Chrysler to put out proposals that have allowed dealers to challenge closures in arbitration.  But a bill passed by Congress allows dealers to bring a much wider range of proof that they are "profitable," whatever angle the dealer of the government will want to call "profitable" these days.

Dealers have until the 25th of this month to notify the automakers if they will appeal.

As for Saab, will it get an appeal and another lease on life, saved by a potential suitor? 

Probably not.  CEO Whitacre put it like a real, down-home car salesmen to the Associated Press- "It's real easy. Just show up with the money and you can have it..." 

I wonder if, like the deal of a few months back, that if you bought a GM car and didn't like it, you could get your money back applies to the entire brand and manufacturer itself?

It could work... 

 

 

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Wed, 01/06/2010 - 20:13 | 185050 ozziindaus
ozziindaus's picture

Whitacre's Maverick reputation proceeds him. Give him a go based on past experience. 

Wed, 01/06/2010 - 20:17 | 185054 God
God's picture

Vanity is a sin Travis.

Wed, 01/06/2010 - 21:38 | 185127 Unscarred
Unscarred's picture

God damn it!  ...Oh, sorry.

Wed, 01/06/2010 - 20:39 | 185079 Anonymous
Anonymous's picture

Great job, GM Senior management. Why, this calls for a million dollar+ bonus!! Go celebrate at the Hamptons, or the Rivera, maybe a taxpayer-funded trip to Vegas? You've earned it.

(yes, that was sarcasm)

I can only imagine how sick the Swedes must be about seeing their once-proud auto company gutted by Detroit. Can't help but wonder if that's what is in store for Hummer now that it's a Chinese brand...

Wed, 01/06/2010 - 23:39 | 185186 ZerOhead
ZerOhead's picture

In store for Hummer you ask?

Apparently a 2010 order from the... wait for it... U.S. military for 10,000+ units for a grand total of $1.7 billion.

The Chinese are initiating a 2010 cost cutting model change which removes most of the armor and offensive capabilities in addition to renaming the brand "CHummer".

http://www.defenseindustrydaily.com/The-USAs-2009-Hummer-Orders-05278/

Wed, 01/06/2010 - 22:51 | 185196 Anonymous
Anonymous's picture

I believe that AM General still owns the rights to make the hum-vee military vehicles. The Chinese only have rights to make the consumer vehicles.

Wed, 01/06/2010 - 23:01 | 185206 Anonymous
Anonymous's picture

The HMMWV (aka"humvee") military vehicle is still built by AM General.

The H2 "Hummer" civilian vehicle built on an SUV frame (Suburban?) is what was sold to China.

Not the same vehicle, fortunately.

Thu, 01/07/2010 - 11:35 | 185433 Anonymous
Anonymous's picture

Some are, some aren't. SAAB has almost never made a profit so it's not reasonable to keep it going. But I am proud of the Swedish Government declining to help SAAB in spite of some union pressure. 6 out of 10 Swedes support the Government in this.

Wed, 01/06/2010 - 23:01 | 185205 Anonymous
Anonymous's picture

FYI -- I work for a GM supplier. Earlier this week we got a call from our GM counterparts. They were asking if we could support volumes up to 1/3 over quoted capacity !!! That's basically double what we are currently doing. Again, this is an "up to" request.

The dealership story backs this up. With mid-terms on the horizon, looks like Govt Motors is going Soviet-style. Crank it out and give it away.

Expect good deals on GM vehicles, less short-term risk for GMAC, a smaller bump for Chrysler, and "indirect" support for Ford...like the Dept of Energy deal a couple of months ago. Maybe even Clunkers 2, or at least continuing tax deductions.

Overall, increases my opinion that 2010 should be good for equity markets. It's impressive how much effort and money is being thrown at things....scary and foreboding as well, but impressive nonetheless. Take advantage while it lasts.

Wed, 01/06/2010 - 23:13 | 185211 Anonymous
Anonymous's picture

Do you really think that the politicians will have no say over this? You know where this came from and where it is going. It is the chicago way

Wed, 01/06/2010 - 23:23 | 185213 AN0NYM0US
AN0NYM0US's picture

Whitacre is the consummate backroom guy - his SBC/Cingular maneuvers are textbook deal making - His appointment of William Daley (brother of Mayor Daley, Clinton Commerce Sec., Gore campaign mgr etc.) back in the day  speaks to his political savvy - as for this move with the dealerships - I think of Saab and the killing of the Magna/Opel deal along with the canning of Fritz, which all have Eddy's stamp on them - as do the TV commercials.  His job is to make this a win for the administration, which will be a successful public offering and he will likely pull it off.  Fritz was/is a car guy who  knew what needed to be done to give GM a fighting chance at survival and was offed for that reason. Ed needs to make two or three  quarters and create a story that Leo's pension pals will buy into.

Wed, 01/06/2010 - 23:29 | 185217 Mad Max
Mad Max's picture

This is so ridiculous.  It looks very unlikely that GM will ever again be a for-profit corporation in the ordinary meaning of the term.  More like one endless welfare roll for a stream of special interests with lobbyists.

Wed, 01/06/2010 - 23:50 | 185226 Anonymous
Anonymous's picture

People are still talking about GM? Where's my Volt?

I love my new 911 Carrera. F'ing great car and 20% off sticker, but wait until pricing for 2010 catches up with the Euro. Get an '09 while you can.

Cheers,

...unexpectedly...

PS: I'm drunk on on three "Classic" cocktails:

2oz Remy Martin VSOP cognac
1oz marachino liquor
1/20 oz orange curacao
1 oz lemon juice
Shakin' and poured lovingly into a sugar-rimmed Waterford crystal (pre bankruptcy) deep champagne saucer.

Thu, 01/07/2010 - 06:06 | 185294 Mongo
Mongo's picture

The different turns around Saab is a f-n joke. Come on! Koenigsegg? The plastic-padding-manufacturer. Was only in it for the publicity. Spyker?.. Haven't even heard about that company before a couple of weeks ago when negotiations with Koenigsegg failed. And then there is that group of investors claiming interest.

 

WTF, this is like the display of the elephant boy and anybody who is first in line gets to be photographed with it!

 

Ah well.. Good riddens when Saab is put down. Feel sorry for the workers but hey.. this wasn't a surprise!

 

Now the union is going out in media claiming that the words from the CEO and the dead-line is just a show and that GM is REALLY REALLY committed to saving Saab even after deadline. Good luck with that!

 

Thu, 01/07/2010 - 08:29 | 185312 koaj
koaj's picture

Jerry Seinfeld will be very disappointed

Thu, 01/07/2010 - 08:44 | 185313 Anonymous
Anonymous's picture

This is funny. Sales are still down so we're going to bump them by keeping dealers open that last year we said should close?

This is game at GM?

Thu, 01/07/2010 - 11:03 | 185388 trav7777
trav7777's picture

Dealers that don't sell cars made by a company that nobody wants to buy from but is owned by the government.

GM will incentivize every car at a taxpayer loss until the side-effect is that all competition is driven out of business.  And then they will proclaim success, look how many cars we're selling.

Politics has just taken over business...the gov controls the car market, financing market, housing market, mortgage market.  If you like Affirmative Action's decision tree as far as how "benefits" should be apportioned, you will really love this.

Thu, 01/07/2010 - 13:01 | 185575 cmalbatros
cmalbatros's picture

Those at SAAB could go and make records, as at their height ABBA was making more money than SAAB & Volvo put together.

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