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General Motors pulls back on dealership cuts

DETROIT — General Motors will keep open about 900 dealerships across the country that it had planned to close, a shift in corporate strategy that could preserve thousands of jobs.

The automaker will wind up with about 5,000 U.S. dealers in July, up from original plans for 4,100, Mark Reuss, GM's North America president, told the Associated Press. It had about 6,000 when it filed for bankruptcy last year.

The change represents a desire by GM's new leadership team to avoid the expense of closing dealerships, a step they say is not critical to bring the company back to profit. GM's large dealer network "used to be one of our main, massive strengths," Reuss said. "I still think that's true. It can be true with the right dealers."

July is the end of a federally mandated arbitration process under which dealerships that GM and Chrysler had targeted could appeal. Partly because of GM's strategy change, only about a quarter of the 1,576 cases brought by GM and Chrysler dealers remain before arbitrators.

GM forced only a trickle of dealers in Central Florida to close. It remains unclear which GM dealers in Florida still undergoing the arbitration process might be saved.

Chrysler, which like GM pared hundreds of dealerships last year, recently confirmed Jack Fitzgerald's dealership in Clearwater would be reinstated. Fitzgerald, who owned 13 dealerships in three states, wrote a memo to employees late last week saying, "The reason the Florida arbitrator decided in our favor is because our customers stood up for us."

Fitzgerald was also fighting to have four of his Chrysler dealerships in Maryland reinstated.

GM on Tuesday would not estimate how many total jobs might be saved. The National Automobile Dealers Association, a trade group, said about 50 people work at an average new-car dealership.

Both GM and Chrysler announced plans to shed 2,800 dealerships as part of their reorganizations. They said their U.S. sales didn't justify so many dealers — nearly 10,000 between them. By comparison, Toyota has only about 1,200 even though it's the second-largest automaker by U.S. sales. GM and Chrysler also argued that closing some dealers would make the remaining ones more profitable and allow them to invest in nicer facilities, advertising and training.

GM's last CEO, Fritz Henderson, convinced an Obama administration task force that GM needed to close struggling dealers. But he was ousted in November, just before Congress passed a law requiring arbitration before either automaker could cut a dealership loose.

Since the arbitration hearings began in February, most cases have been settled — either because GM and Chrysler reinstated dealers or the dealers withdrew their cases, some of them to sign with other automakers, others to close for good. About 300 GM dealers and fewer than 100 Chrysler are still awaiting a decision from arbitrators.

Reuss wouldn't elaborate on the change in GM's strategy.

"I'm concentrating on what it needs to be for the new GM," he said. "I think we've removed a lot of the anxiety and all the things that go with that."

Chrysler, too, will have more dealers than it planned when it emerged from bankruptcy, although it won't say exactly how many. It closed about 800 last summer but has since agreed to reinstate about 10 percent of those.

Because it closed its dealers immediately last year — instead of giving them a year's warning, as GM did — Chrysler also faces some sticky legal cases. For example, an arbitrator recently ruled that Chrysler should reinstate a Dodge dealer in DeLand that was terminated last June. But Chrysler had awarded DeLand Dodge's franchise agreement to another dealer across the street. DeLand Dodge general manager Jeremy Kiel said it's unclear what will happen next. In the meantime, he has had to lay off 10 employees.

Still, arbitrators are siding with Chrysler more often than not. As of Tuesday, arbitrators have decided 22 cases in its favor and six in favor of dealers.

Fast facts

1.5M GMs recalled

GM is recalling about 1.5 million vehicles worldwide to address a problem with a heated windshield wiper fluid system that could lead to a fire. The recall covers the 2006-09 model year Buick Lucerne, Cadillac DTS and Hummer H2; 2008-09 Buick Enclave and Cadillac CTS; 2007-09 Cadillac Escalade, Escalade ESV and Escalade EXT; 2007-09 Chevrolet Avalanche, Silverado, Suburban and Tahoe; 2007-09 GMC Acadia, Sierra, Yukon and Yukon XL; 2007-09 Saturn Outlook; and 2009 Chevrolet Traverse. GM conducted a similar recall in 2008 but came across new reports of fires in vehicles that had been fixed. GM said it is telling dealers to permanently disable the heated washer-fluid system and that each affected owner would receive $100 to compensate for the loss of the feature. GM said it had received reports of five fires, but none involved injuries or crashes. All but 163,115 of the affected vehicles are in the United States.

General Motors pulls back on dealership cuts 06/08/10 [Last modified: Tuesday, June 8, 2010 10:00pm]
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