Suburban Toledo, Pemberville dealers among 1,100 GM is eliminating

5/15/2009

DETROIT A day after Chrysler LLC told a quarter of its dealers that it won't renew their contracts, owners of General Motors Corp. dealerships Friday were being told whether they will be next.

GM said it was notifying 1,100 U.S. dealers that their franchise agreements will not be renewed. Most expire in October, 2010.

Among those getting cut is 85-year-old Eisenhour Motor Sales Inc., in Pemberville. It sold 40 Chevy vehicles last year, according to the Toledo Auto Dealers Association figures.

We re disappointed, but we suspected we might be on the list, said Brian Eisenhour. The dealership was notified Friday morning by letter sent overnight delivery.

Mr. Eisenhour s grandfather started selling Chevrolet vehicles in Pemberville in 1928 a few years after launching the business with different models.

After the loss of Chevrolet next year, the firm will stay in business, but will concentrate on service and sales of used vehicles.

Another Toledo area dealer getting a notice was Brown Pontiac on Central Avenue in Sylvania Township. The notice was not surprising because GM has said it will eliminate all of its Pontiac, Saturn, and Hummer dealerships. Owner Robb Brown said the notice allows him to keep selling Pontiacs through October, 2010.

More than a dozen northwest Ohio dealers polled Friday by The Blade said they had not received termination notices.

GM spokeswoman Susan Garontakos said the company would not make public a list of dealers to be cut, leaving the decision to release information to individual business owners. Several GM vehicle dealers in metro Toledo said Friday they had not received notices that their franchises will be eliminated.

The cuts come just a day after crosstown rival Chrysler announced it was dropping 789 of its roughly 3,200 dealerships by around June 9. Both companies have too many dealerships for too few sales are slashing costs as they race to restructure. Chrysler's cuts include 47 Ohio dealerships.

GM dealers around the country nervously awaited news. In Richmond, Va., Royal Chevrolet co-owner Del Mugford was slightly relieved when he sifted through FedEx packages Friday morning and hadn't received any bad news from General Motors. But he knew his future could be determined by a phone call or a piece of mail.

"This is absolutely nerve wracking. It's like a death sentence. It's the worst feeling in the world," said Mugford, 45, who bought the dealership with his younger brother in 2002 after owning an Oldsmobile franchise down the street. GM closed its Oldsmobile line of cars in 2004.

John Rogin, who owns a Buick dealership and GMC truck dealership in the Detroit area, was also awaiting word. But he said he's not worrying. His Buick store, he said, has been among the top 10 performers in the country for 15 years.

"I'm just selling cars. I'm still a loyalist, and for the most part a purist as far as GM goes," he said.

Many dealers, though, will fight the cuts in court, he said.

"Most of the dealer body realizes that just because you get a letter doesn't mean it's all over," he said. "This company isn't in bankruptcy."

GM's dealer cuts are part of the company's plan announced last month to cut more than 2,600 dealers by 2010. The remaining cuts will come from closed Saturn and Hummer dealers, along with 400 dealers that the company expects will close voluntarily. Another 500 would be consolidated into other dealerships.

The GM dealer cuts are likely to have a much greater impact than Chrysler's. While many Chrysler dealers also sell other brands and will stay open after losing their franchises, a large number of GM dealers sell only GM vehicles. So if their franchises are revoked, they run a greater risk of closing for good.

In both cases, the cuts will cost thousands of jobs, create holes in local tax bases, eliminate community pillars and create economic ripple effects across the country.

Chrysler is operating under bankruptcy protection, so it is likely to have an easier time tearing up its franchise agreements with its dealers than GM. A hearing is scheduled for June 3 in U.S. Bankruptcy Court in New York for the judge to determine whether to approve Chrysler's motion to fire its dealers.

Chrysler executives said Thursday the company is trying to preserve its best-performing dealers and eliminate ones with the weakest sales. More than half of the dealerships being eliminated sell less than 100 vehicles per year, they said, and account for 14 percent of U.S. sales.

Five of the Chrysler dealers to be eliminated are in northwest Ohio, and included Ed Schmidt Jeep Eagle in Perrysburg and Bowling Green Jeep in Bowling Green.

Chrysler has received $4 billion in government aid, while GM has received $15.4 billion. GM is continuing to restructure out of court and faces a government-imposed deadline of May 31 for doing so. Several difficult hurdles remain, and many experts say that it is all but inevitable that it will follow Chrysler into Chapter 11 bankruptcy.

To remake itself outside of court, GM must persuade its bondholders to swap $27 billion in debt for 10 percent of its risky stock. In addition, it must work out deals with its union, announce factory closures, cut or sell brands and shutter dealers.

Swapping its bond debt for equity may be its most difficult task. The company is trying to get 90 percent of its bondholders on board for the so-called debt-for-equity swap. A committee representing the bondholders has rejected the swap, saying it unfairly favors the government and the United Auto Workers union. They have counteroffered seeking a 58 percent ownership stake, which the automaker in turn rejected.

On Thursday, GM said that bankruptcy is possible if it doesn't get enough takers on the exchange. If that happens, it likely would sell most of its assets to a new company and liquidate the rest, the automaker disclosed in a regulatory filing.

The automaker also says it could seek court approval of its reorganization plan even if creditors vote against it.