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Tampa Bay GM dealers might avoid the automaker's ax

Friday was D-Day for 1,100 General Motors dealers told they might close as early as this month.

But as of Friday evening no Tampa Bay area GM dealers had confirmed they were on the hit list.

In fact, Chevrolet dealers across the region assumed none of their colleagues and competitors would get the ominous certified letter from the parent company.

"We were told in a conference call that Pinellas County dealers were rock solid," said Bob Towler of Maher Chevrolet in St. Petersburg. "This first round of cuts was really for dealers not living up to their franchise agreements."

Castriota Chevrolet in Hudson, Dick Norris in Clearwater and Ferman Automotive also seemed to have ducked the firing squad. Ferman runs three GM stores in and around Tampa. Dick Norris runs two, in Clearwater and Palm Harbor.

"Every dealer feels like we just got over a hurdle," said Tom Castriota of Castriota Chevrolet, which employs 90. "Employees certainly feel more comfortable. And customers wanted to know if we were going to be here Monday."

Close to bankruptcy, GM said it's targeting "underperforming" dealers with small sales volumes stuck in uncompetitive markets. Nearly 500 of the dealerships targeted for closing sell less than 35 new GM vehicles a year, said Mark LaNeve, GM's vice president of North American sales and marketing.

The average Toyota dealership sells almost 1,300.

"Too many dealers, in actuality, are a problem," LaNeve said.

Unlike Chrysler, which on Thursday published a list of nearly 800 dealers due for closure, GM did not disclose a list of the dealers it plans to eliminate.

Dealerships themselves will have to make the announcement, and a full roster of soon-to-close stores probably won't take shape until next week.

Keeping a tight wrap on the bad news, GM released store closing data on a need-to-know basis. Chevrolet dealers, for example, knew the disposition of other local Chevy dealers but not of Buick, GMC or Cadillac dealers.

Local franchisees said GM offered financial incentives for dealerships that volunteer to close immediately instead of waiting until September 2010. The incentives included buying back inventory, auto parts and equipment. If the automaker declares bankruptcy as expected next month, the deal will be off the table.

The cuts are part of a larger GM plan to drop 2,600 of its about 6,000 dealerships as the automaker tries to regain profitability. Aside from the 1,100 dealership cuts, the company plans to sell its 470 Saturn, Hummer and Saab dealerships.

Friday's cuts will not be the last. GM said it expects to lose more dealers through attrition. Ultimately, about 90 percent of the remaining dealerships will stay with GM, the company said.

FedEx letters bearing the bad news began arriving Friday morning at GM dealers around the country. The letters state that dealers were judged on sales, customer service scores, location, condition of facilities and other criteria.

The letter left open the possibility that the decision could be reversed.

Both Chrysler and GM insist outlets are too close to one another, and that competition drives down prices. But as the dealer ranks thin and competition wanes, prices could rise.

As GM and Chrysler lost market share to Japanese and Korean brands, the automakers, as well as Ford Motor Co., ended up with too many dealerships. Many barely get by and can't afford to upgrade or hire the best personnel to compete with the Japanese, who have far fewer dealerships.

With fewer dealers, consumers won't see as much competition, said Aaron Bragman, an automotive industry analyst with the consulting firm IHS Global Insight.

"No longer will people be able to shop between three or four dealers within 15 minutes of each other for the best cutthroat price," he said.

GM held nearly 51 percent of the auto market in 1962, but only 22 percent last year.

Bragman said GM likely will go into bankruptcy protection June 1, but it's starting to negotiate deals ahead of the filing to speed up the Chapter 11 process.

"GM has been … acting as if they are negotiating a prepackaged bankruptcy," he said.

Information from Times wires was used in this report. James Thorner can be reached at (813) 226-3313 or jthorner@sptimes.com.

Tampa Bay GM dealers might avoid the automaker's ax 05/15/09 [Last modified: Monday, May 18, 2009 11:45am]

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