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General Motors Plans to Reinstate 661 Dealers to Shore Up Sales

2010-03-06 07:30:30.765 GMT

By Katie Merx

March 6 (Bloomberg) -- General Motors Co. plans to

reinstate 661 dealers and may enter arbitration with as many as

400 outlets as the biggest U.S. automaker attempts to stem

declines in domestic market share.

GM offered franchise agreement letters to the dealers,

North America President Mark Reuss said yesterday in a

conference call. The company has about 5,500 outlets.

“We are eager to restore relationships with our dealers,”

said Reuss. “The arbitration process creates uncertainty in the

market. Issuing these letters of intent is good for our

customers, our dealers and GM.”

The Detroit-based automaker is trying to increase U.S.

sales and market share while trimming four of its eight brands.

Chief Executive Officer Ed Whitacre named Reuss, 46, to the post

in December in a shuffle of top managers.

GM accounted for 19.9 percent of U.S. sales of cars and

light trucks last year, a drop from 22.3 percent in 2008,

according to Autodata Corp. in Woodcliff Lake, New Jersey. Ford

Motor Co. beat GM in monthly sales in February for the first

time since 1998.

The dealer reinstatement plan “is a good thing,” said

Maryann Keller, president of Maryann Keller & Associates in

Stamford, Connecticut. “There were false economics in

terminating that many dealers. If they restore what they’ve lost

and put back into business dealers that were financially viable,

then they will gain sales.”

Dealer Response

The National Automobile Dealers Association said the plan

was “a significant move forward.”

“We appreciate the good-faith effort that GM is showing

and hope that this carries forward in its continuing settlement

and arbitration discussions with the remaining wind-down

dealers,” association Chairman Ed Tonkin said in a statement.

Reuss said last month that repairing dealer relations is

his most important priority. On March 2, he announced changes to

his North American leadership team that reduced management

layers.

The company began to re-evaluate the closing of 1,100

retailers after Congress passed a law in December to give GM

dealers who lost or were scheduled to lose franchises the right

to hearings. The binding arbitrations may reverse the

automaker’s termination decisions.

“It was going to be virtually impossible to take 1,100

cases and arbitrate everything in a 120-day period,” GM North

America Vice President of Marketing Susan Docherty said during

the call. Decisions were made based on the company’s criteria,

the time they had to handle the cases and how the company

believed arbitrators would look at each dealership, she said.

Chrysler, which targeted 789 dealers for closing, is also

bound by the law. Chrysler’s arbitration isn’t expected to begin

until late this month or early April, said Kathy Graham, a

spokeswoman.

For Related News and Information:

U.S. auto industry: TNI US AUT <GO>

Autos and U.S. economy: TNI AUT USECO <GO>

U.S. auto bailout: STNI AUTOBAILOUT <GO>

U.S. auto sales graph: SAARTOTL <Index> GP <GO>

GM’s debt distribution: 3341199Z US <Equity> NDDS <GO>

--With assistance from Mike Ramsey. Editors: Steve Walsh, John

Lear, Nicolas Johnson.

To contact the reporter on this story:

Katie Merx in Southfield, Michigan, at +1-248-827-7130 or

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To contact the editor responsible for this story:

Jamie Butters at +1-248-827-2944 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .