NEW YORK – General Motors on Friday told about 1,100 of its dealers – 1 in 5 – that they would be dropped by late next year, adding to the economic pain radiating from the beleaguered Detroit automakers to cities and towns across the country.
Including Chrysler’s decision a day earlier to eliminate one-quarter of its own, about 1,900 dealerships – many pillars of their communities and heavy advertisers for local media – learned in a matter of 48 hours that they would be forced either to sell fewer brands or close altogether.
The GM dealerships will be eliminated when their contracts end late next year.
“We’re 98 years old. We’re two years from a hundred, and I don’t want to go out at 99 years,” said Alan Bigelow, whose family runs a Cleveland-area Chevrolet dealership that learned it was on GM’s hit list.
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In the South Sound, GM dealers were reluctant to discuss any news they might have received from General Motors.
“Even if we had received a notice that we were on the hit list, do you think we would talk about it?” said one Pierce County auto dealer sales manager who declined to be identified.
Local dealership managers say they understand that economic pressures on GM might force it to cull its dealership ranks, but they wonder whether the move is short-sighted.
“In one respect, there might be too many now, but I wonder whether reducing the numbers will harm GM when the car market revives? Will their competitors just steal more market share?” asked Don Thompson, general manager at Federal Way’s Jet Chevrolet.
None of the two dozen dealers contacted by The News Tribune said they had received a notice that their franchise would be dropped. They speculated that small-town dealers in diminishing markets would likely be forced to close. But even small dealers such as Shelton’s Mell Chevrolet claimed they will continue to be new car outlets for GM.
“We’ve been in business a long time here, and we don’t intend to see that change,” a spokesman for that dealership said.
Though new car business has been down, said Flip Grey of Port Orchard’s Grey Chevrolet, the dealership’s sales are above projections. The used car business has been particularly healthy, said Grey, the dealership’s sales manager.
Grey said he expects Kitsap County won’t lose any more Chevrolet dealers. In the past three years, the number of Chevy dealers in that market area has dropped from four to two as dealers in Poulsbo and Gig Harbor left the market.
While GM doesn’t own the dealers, the company said its network is too big, causing dealers to compete with each other and giving shoppers too much leverage to talk down prices and hurt future sales.
Several hundred of the GM dealers knew already that they were headed for closure, but most of them learned for the first time Friday. An industry group said the GM and Chrysler cuts combined could wipe out 100,000 jobs.
Both GM and Chrysler are scrambling to reorganize and stay alive in a severe recession that has pummeled car and truck sales for U.S. automakers, which had already been losing market share to foreign companies for decades.
Chrysler LLC already is in bankruptcy protection, and industry analysts said General Motors Corp. is making its cuts now in preparation for a bankruptcy filing June 1. The company said it would prefer to restructure out of court.
GM declined to reveal which dealers will be eliminated. Many dealers vowed to fight, first through a 30-day company appeal process, then possibly in court.
GM’s dealers are protected by state franchise laws, and the company concedes it would be easier to cut them if it were operating under federal bankruptcy protection.
The News Tribune contributed to this report.