Southern Wisconsin GM dealers avoid elimination
JANESVILLE — General Motors' dealers in southern Wisconsin avoided the knife Friday as the automaker announced an 18 percent cut to its dealer network.
GM notified about 1,100 dealers Friday that it would not renew franchise agreements when they expire in fall 2010.
The automaker declined to reveal which dealers will be eliminated based on financial and sales performance, instead leaving it up to the dealerships to report the decision.
A sampling of GM dealers Friday in Rock, Walworth, Green and Jefferson counties failed to turn up a single dealer who got bad news from GM.
Still, the wait for some was unnerving.
"You just don't know, and what's really hard is when the decision is 100 percent out of your hands," said Tom Finley of Finley-Dencker Buick Pontiac GMC in Beloit.
Mired in a restructuring and desperate for revenue, GM and Chrysler plan to close about 3,600 of their 9,700 dealerships. Chrysler identified 789 dealerships Thursday that it will close.
That's a strange business model, say the dealers who argue that they are essentially a free distribution channel for the automakers and are not the burdensome cost centers targeted by the Obama Auto Task Force.
GM has said that its network is too big, causing dealers to compete with each other and giving shoppers too much leverage to talk down prices and hurt sales.
The Wisconsin Automobile & Truck Dealers Association has joined with the National Automobile Dealers Association to criticize the automakers' plan.
William Sepic, the WATDA's president, said dealers pay the automakers for vehicles before they leave the assembly plant. Dealers also pay for parts before receiving them, pay all their employee costs, pay their own real estate costs and pay for their own equipment and information technology.
"Dealers pay their own way," Sepic said. "For manufacturers, dealers equal revenue, not cost. Dealers generate more than 90 percent of manufacturers' revenue."
Why an industry that's trying to get healthy would slash that revenue stream is beyond the understanding of Jim Fagan of Fagan Chevrolet-Cadillac in Janesville.
"I think this is a super dangerous move," Fagan said.
In addition to cutting revenue, the dealer elimination plan could have other consequences.
Thousands of jobs will be lost in Wisconsin, as will tax dollars and charitable donations, Sepic said. Businesses that sell to dealerships will be affected; customers will be inconvenienced.
Fagan said underperforming dealerships and those that can be cut by attrition are rightly at the top of GM's list. Beyond that, he said, many large metro areas have too many dealers.
While Fagan's dealership is safe, he worries about the small-town, rural dealerships.
"If you take a dealer out of a small town, what's going to happen?" Fagan said. "There were people in that town who bought from him because he was a local guy and they wanted to support him.
"When he's gone, customers will have to drive to another town, and, guess what, they'll have to drive right past dealerships that offer other choices."
Sepic said an abrupt cut in dealer numbers will cut market share and do nothing to improve the near-term viability of GM or Chrysler, both of which have taken billions of tax dollars.
The nation's dealers, he said, have been made a scapegoat for the automakers' "poor performance, cost-control failure and sub-stellar decision-making."
Friday's cuts are part of a larger GM plan to drop 2,600—nearly 42 percent—of its 6,200 dealerships as the automaker tries to restructure outside of bankruptcy court.
Besides the 1,100 dealership cuts, the company will provide updates to about 470 Saturn, Hummer and Saab dealerships on the status of those brands, which it plans to sell.
The 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.
Material from Gazette wire services was used in this story.
May 18, 2009 at 7:58 p.m.
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IrishEyes83, how do you know that if the dealers are not required to tell you?
May 18, 2009 at 1:44 p.m.
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My mistake.
May 18, 2009 at 1:06 p.m.
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GM did not announce any of the dealers...and the article is right that all the Southern Wisconsin dealers are safe for this time around.
May 18, 2009 at 12:58 p.m.
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Most dealers won't let you know if they are on the list, because they fear that will hurt business. They can operate up till that date without anybody knowing. This will keep their experienced staff on hand also.
GM can finacially benefit from this dealer reduction. The more dealers they have, the more support staff GM needs. Also, if you have 4 Chevy dealerships in a 50 mile radius, GM has to split the advertising costs on all of these. If you only had one dealership for 50 miles, you only need to run one ad, and split that one ad. As somebody had already mentioned, it also reduces the competition within the dealers which drives down cost and value of the product.
May 18, 2009 at 12:15 p.m.
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Mikki, GM will not release the list. The list from last week was for Chrysler.
May 18, 2009 at 11:23 a.m.
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The list of dealerships were given last week, by GM. There was a press release that listed all the dealerships.
May 18, 2009 at 10:58 a.m.
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How are you sure this story is even true? GM said they would not release the list nor are the dealerships required to say they were notified. Just because a reporter calls do you really think they will say the truth if asked?
May 18, 2009 at 10:36 a.m.
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Hay "site staff", maybe you should try to be at least a little consistent... Take a look at ja67’s post, they mention a dealership by name and you have not deleted their comment... I did mentioned a dealer by name and you deleted my comment the other day, you are already participating and encouraging the Socialist movement taking place in this country aren't you!!! Way to go, Hugo Chavez would be proud…
May 17, 2009 at 3:13 p.m.
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I hope all of you realize we did this to ourselfs.... Its nice everyone trys to always blame another group of people or someoneone else...Maybe if all the workers at the GM plant here in janesville said yes we want to keep our jobs. You can cut my pay to $12bucks a hour like the Tech is getting paid at Fagan. Or the factory work at Hufcor is getting pair or the worker at Lemans. And then since GM doesn't have to pay me so much money to make the tahoe, they can actually start to make a profit so my job will still be here.. But then you come back and say well I can't afford to pay for my brand new Prefered homes $200k house and 2 new cars and plasma tv's on 12 bucks.... Well nobody told you that you had to get the loan for all those things buddy... Those people that work at ALLL the rest of the factorys and manual labor jobs in this city make HALF of what you did.... And you can't tell me that they don't work as hard as you did everyday.... Hell I bet alot do more work then you GM folk for half thepay... You don't here them complaining do you???? And you see them making a living off it, and being able to support a family....You are all Reaping what you Sowed.... have a nice day :)
May 17, 2009 at 2:33 p.m.
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getting rid of dealerships is NOT going to solve the bankruptcy issue. GM needs to get rid of deadweight like too many mid and upper level managers doing nothing and the Saab, Hummer, and Saturn brands that are not profitable. Too many clones in their lineup like GMC trucks having the same engine, tranny, and frame as the Silverados except for cosmetic parts. Too bad Pontiac is going since there are actually a couple Pontiac cars worth buying. I agree there is too many GM dealers, but the # of dealrs was like this 30 years ago and is not the underlying problem. After GM goes into bankruptcy June 1, they need to act quickly within 6 months to no more than 1 year and return a profit with a lot less debt for the future or you will see 100's of thousand of loyal GM customers loose faith in GM products and then the end of GM. Hope it does not happen because competition is a good thing.
May 17, 2009 at 12:12 a.m.
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This is so cool. We get to have those awesome GM Chinese cars sold here after they clear out the current inventories of U.S. Made cars. Something like a hundred thousand plus coming our way. All parts made and imported from china. They need the best dealers to push these. Or they go down. Part of CEO Obamas take it or leave it stimulus.
May 16, 2009 at 10:39 p.m.
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Let's keep our fingers crossed. GM has shown a trend to follow bad news with worse news.
May 16, 2009 at 4:44 p.m.
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It reduces overhead for GM, which is going to be closing plants to reduce production anyway. Many analysts have argued for years that the Big Three have all had dealer networks sized for the sales of 20 or more years ago. GM once had 50% of the American car market; for as long as I can remember they've had trouble topping about 33%, and more recently it's fallen closer to 25%. Some think that it could fall as low as 15% or less.
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Arguably, the oversupply of dealers put downward pressure on prices, which was ultimately felt by GM itself.
May 16, 2009 at 4:21 p.m.
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How's closing dealerships going to improve car sales again? Can someone bring some logic to this concept for me? OH, the humanity!!!
May 16, 2009 at 4:20 p.m.
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I was glad to see that Fagan Chevrolet wasn't affected. I always have given them high praise when doing business with them, either buying a new car and a truck. Their service area for oil changes and other repairs are the BEST.
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