GM Plans to Keep 95 Percent of Eligible Dealers

In spite of the massive dealership cut announced by General Motors some weeks ago, the company's CEO Fritz Henderson recently revealed that more than 95 percent of eligible GM dealers will remain with the new company. Additionally, 90 percent of those rejected have already signed or at least, verbally agreed, to the wind-down terms proposed by the company.

In an oral testimony Henderson underlined once again the need for a strong dealership network that would support the company in the restructuring process, emphasizing that terminating contracts with those unprofitable is a must do in such a context.

"A right-sized network of strong dealers will allow GM to systematically over time reduce direct dealer support programs which today involve $2 billion in costs ($1,000 per retail sale) - or a gross savings potential of about $928,000 per dealer if and when fully phased-out. This does not take place immediately, but these support programs, or "subsidies," have been incorporated over time to help dealer profitability as our dealer network weakened financially. To the best of our knowledge, our best-in-class competitors bear few, if any, of these costs," Henderson said.

General Motors intends to reduce the overall dealership count to 3,500 to 3,800 by the end of 2010.

"Finally, even with these cutbacks GM will still have the largest dealer network in the country - more than any of our competitors. In our case, around 3,600 v. Toyota's 1,200. This would include an extensive rural network of 1,500 dealers nationally...in markets where we hold, on average, more than a 10 point advantage in market share," GM's CEO added.