Wednesday, June 3, 2009

The Day After - GM Dealers Get Letters

A strong and emotional article by Greg Goebel

Today, June 2nd, was the day that 5969 dealers received FedEx packages of either good news, a Participation Agreement (OK, it's not-so-bad-news, your franchise agreement may be renewed), or bad news, a Wind-Down agreement and payment of some monies to help you liquidate your inventories.

My phone started ringing early this morning. Five friends/clients all with at least one Wind-Down, and some with Participation Agreements. Shortly after the calls I had copies of the agreements forwarded to me. Out of confidentiality I can't post copies here of the documents, but they weren't short.

Bottom line is that dealer have until June 12th to sign and return the documents to GM. They were absolutely as heavy handed as I predicted they would be in yesterday's blog. Incorrigible.

Wind-down dealers may purchase no more vehicles from GM, but must stay in business through at minimum January 2010, and up to October 31, 2010. They must continue to service and honor warranties. However, they may not return any parts - whether currently owned, or those bought from GM during the 18 month transition. Yeah, that's right. Order a part, have GM ship you the wrong one and you own it, regardless. The RIM program is gone. I have one client that has about $140 in GM parts in inventory. That is going to leave a mark. His Wind-Down incentive? $36K.

The smallest package I heard today was for a nearly new store in a smaller market that is losing Pontiac and Cadillac. (Cadillac was an addition from May 15th). $12,000 is all they get.

There are a number of friends and clients that I have not talked with today. I truly hope no news is good news, but based on the heavy handedness put forth by GM for those that get to keep their franchises (if they comply) there may not be any good news. Dealers are being asked to blindly agree that they "must substantially increase its sales of new [GM vehicles]" and that the dealer will be assigned goals each year that they must meet. (Sidebar: Has a manufacturer ever been overly optimistic on what their market share should be?) They must willing to use their best efforts to "stock sufficient additional motor vehicles" in order to hit these assigned sales goals. MORE INVENTORY?! Have you seen the seven, eight or nine month supplies that some dealers have? They want them to take more?!

No duals will be allowed with non-GM franchises. Expect to have facility upgrades mandated. (That has worked so well for Toyota dealers over the past 12 months...) Oh last thing. You agree to indemnify GM and agree not to file suit.

Yes, you may call me cynical, but I am not sure which side got the worse end of the deal. OK, I have repeatedly stated, it is just incorrigible to have your independent profitable business terminated for you, so sure, they are getting the worse end, but I am not sure I would run out and celebrate for the other group. This is the ultimate "shotgun wedding."

Finally, what was my advice? It was simple - sign the agreements. If you don't, you get to pay an attorney to go to battle. Then, should you win the battle (and I assure you it won't be cheap), you still lose the war. You will be grouped with the Old GM assets (what few there are) and all the old liabilities. As wrong as it is, GM's offer is still better than what is being offered terminated Chrysler dealers. It at least gives them some time to plan to do something and a modicum of compensation.

For the rest, take it or leave it. (Wink-wink - we guess it is kind of hard to leave that big expensive facility we had you build.) I doubt the winners will ever forget the gun that GM has put to their heads. Of course GM says they want transparency and to be a good partner. That looks like lipstick on a pig to me...and this is one big pig contract. Sounds like to me they have been associating with some career politicians too long already.


AFI's take on this: I hope all these dealers take care in securing all those deal jackets full of customer information. There is a GM dealership where I bought a car from several years ago on this list whose General Manager will be getting a personal visit from me to explain how their red flags and safeguards procedures will be protecting my private information. Keep this in mind if you purchased a vehicle from a closing dealership. What a nightmare - thinking about trash pickers looking through piles of deal jackets and all the info contained therin. Aarrgghh - Please wake me up.

View Greg Goebel's blog HERE


Dealership Death Watch - Car Dealer Photos

1 comment:

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