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  • As The GM World Turns; Lawsuits From Axed Stores Could Happen

As The GM World Turns; Lawsuits From Axed Stores Could Happen

May 4, 2009

Nate Martinez
May 4, 2009
General Motors could face a slew of lawsuits from closed dealerships as a result of the brand's widespread restructuring plans, Automotive News reports.
Photo 2/2   |   gm Lawsuits From Axed Stores
Around 1200 dealerships slated for franchise contract termination will be sent letters from GM officials. Those being cut from the "reinvented GM" are considered "poor performers" based on sales numbers and customer service feedback and tend to be located in dealer-saturated metro areas.
Approximately one in six GM dealerships is labeled as a "poor performer", officials say. Closed dealerships will have their remaining vehicle and parts inventories repurchased by General Motors, although no compensation will be given for other extraneous business losses or expenditures.
Some lawyers interviewed by Automotive News stated that the General may be protected from the barrage of lawsuits if it is forced to declare bankruptcy thanks to federal laws. If it doesn't, many dealers have already hired attorneys who are ready to take legal action against the automaker.
GM faced much the same situation when it closed Oldsmobile dealerships a few years ago. Around $1 billion in dealer compensation and four years later, GM and its ex-franchises came to an mutual termination agreement.
Here are the basics in regards to GM's future dealership plans:
-- GM, which had 6273 U.S. dealerships, excluding Saab, at year end 2008, plans to cut about 2700 stores by the end of 2010.
-- 1000 to 1200 dealers deemed poor performers will be terminated.
-- About 500 will close because of normal attrition.
-- About 500 will depart with the sale of Hummer, Saturn and Saab.
-- 35 will go with the phaseout of Pontiac.
-- About 500 will consolidate in buy/sell or other negotiations that GM will manage.
Source: General Motors via Automotive News (Subscription required)
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