General Motors' descent into bankruptcy last year was pursued by the company in part because it had become too unwieldy. The Detroit behemoth had (among other problems) excess plant capacity, more brands than it needed and -- so it thought -- too many dealers. But the new GM is backtracking on that last item, with a top executive disclosing in an interview Tuesday that the company plans on reinstating 900 car dealerships it had sought to shut down.
GM's original plan called for the automaker to have about 4,100 dealers, but it will now wind up with some 5,000 come July, North America President Mark Reuss, told the Associated Press. GM had about 6,000 franchises when it filed for bankruptcy last year. The executive told the news agency that GM's extensive dealer network was once one of the automaker's great strengths.
"I still think that's true," Reuss said. "It can be true with the right dealers."
July marks the deadline for dealers to appeal the decisions to close their businesses under a federally mandated arbitration process that began in December. Chrysler Group has also moved to shut down some of its dealerships, and a total of nearly 1,600 GM and Chrysler dealers filed appeals to keep their doors open through the process. With GM's decision, only about a quarter of the 1,576 cases brought by the dealers remain before arbitrators, AP reported.
Reaching Out to the Dealerships
GM's seeming altruism is also being driven by money. The company's new leadership team, headed by CEO Ed Whitacre, is keen on watching costs. Shutting down dealers can be expensive, and it's not essential to bring the company back to profitability.
GM began reinstating dealers back in March, when it said some 600 previously targeted outlets would be kept. Among those were Painter Motor in Nephi, Utah, which retained its Buick and Chevrolet franchise, as did Hansen Motor in Brigham City, Utah, which sells Cadillacs, The Salt Lake Tribune reported.
GM started reaching out to dealers even before arbitration started, said Craig Bickmore of the state's New Car Dealers Association. "As a result, the vast majority of those who were [to be cut] in Utah were allowed to take their stores back."
Since arbitration hearings began in February, most cases have been settled -- either because GM and Chrysler reinstated dealers or because the dealers withdrew their cases, AP reported. About 300 GM dealers and fewer than 100 Chrysler dealers targeted for closure are still awaiting arbitrators' decisions.
Chrysler will also wind up with more dealers than it had originally planned, but hasn't yet disclosed how many. It shut down about 800 franchises last summer, but has since agreed to reinstate about 10% of them.
What are Penny Stocks
The lucrative and dangerous world of penny stocks.View Course »