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Published: Saturday, 3/6/2010

GM to reinstate 661 dealers

FROM BLADE STAFF AND NEWS SERVICES

General Motors Co. said Friday it will offer reinstatement to 661 of its U.S. dealers that had been targeted for closure as part of its bankruptcy restructuring last year.

GM planned to terminate franchise agreements with about 1,300 U.S. dealers by the end of 2010 in a bid to operate its retail networks more efficiently and return the company to profitability. Some 1,160 of them have sought arbitration.

None of the dealers was identified, so it was unclear whether any are in northwest Ohio or southeast Michigan.

Tom Allen, owner of Allen Chevrolet Cadillac in Monroe, Mich., was among the dealers who elected to pursue the arbitration process to save his franchise agreement.

Though the dealership was "staying open regardless of what happens," Mr. Allen said the news yesterday from GM was welcome in Monroe, even though dealers don't yet know if they'll be selected to remain.

"It's kind of like saying, 'Christmas is coming, but we're going to delay it.' Until you really know where you stand, you don't want to jinx yourself," Mr. Allen said. "Do we feel we have a strong [arbitration] case? Absolutely. But until the decision's made, you don't know."

Several GM dealers across northwest Ohio and southeast Michigan were among the 1,300 slated to lose their franchise agreements.

Some - such as Brown Pontiac, Saturn of Toledo, and Saturn of Findlay - were the result of GM's 2009 decision to kill off four of its "noncore" brands: Pontiac, Saturn, Saab, and Hummer.

Other dealers, such as Knapp Motors in Blissfield, Mich., Ed Schmidt Auto Group in suburban Toledo, and Dunn Chevrolet in Oregon, lost at least one of their franchises but retained others.

Others, such as Eisenhour Motor Sales Inc., in Pemberville, chose not to seek arbitration and will not be restored.

GM North American President Mark Reuss said the automaker has opted to reinstate more than half of the dealers appealing closure in an effort to complete the arbitration process before the congressionally mandated deadline of July 15.

The company plans to continue settlement talks with some 500 dealers who will not be offered reinstatement and remain in arbitration, Mr. Reuss said.

To be reinstated, the dealers will have to meet certain business criteria, including minimum working-capital requirements, sales, and profitability within 60 days of receiving reinstatement letters next week, GM said.

"We are highly confident that this is the right size and the right quality," Mr. Reuss said in a conference call with reporters.

GM had 6,150 dealerships at the end of 2008, including franchises of Saturn, Saab, Hummer, and Pontiac - the four brands GM is selling or winding down. Those franchises were to end by October.

The U.S. Treasury owns 60 percent of GM after the 2009 bankruptcy restructuring.

Congress in December required an arbitration process for terminated dealerships at GM and Chrysler Group LLC, which received more than $65 billion combined in taxpayer-supported bailouts and other financing over the past year.

Chrysler closed nearly 800 showrooms in June when it emerged from bankruptcy under new management led by Fiat. More than half of them have sought arbitration, saying their franchise rights were terminated unfairly. The arbitration process isn't expected to begin until late this month or early April.

The arbitrator under the legislative plan would be required to consider dealer profitability over the past four years as well as how a dealer would support the plans at GM and Chrysler to become viable.

Arbitration would take into account a dealership's performance and how well it was capitalized.



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