More than 600 GM Dealers to be Reinstated
DETROIT — The rebirth of hundreds of soon-to-be-eliminated General Motors dealers took an enormous step forward late last week when the automaker announced it would send more than 600 Letters of Intent for dealership reinstatement.
GM did not give a specific number of letters it intends to send, but other media reports had the figure ranging from 601 to as much as 661.
GM executives indicated these letters contain their usual core business criteria. They stressed that this action can allow these dealers to conduct normal operations as soon as they comply with the terms of the letter of intent.
The manufacturer emphasized that it reviewed each of the approximately 1,100 dealer arbitration claims that were filed with the American Arbitration Association
"We conducted these individual reviews, keeping in mind our goal of moving quickly and effectively to complete the overall arbitration process and determined that we would send more than 600 Letters of Intent to the involved dealers," GM executives explained.
Dealers learned last year that the automaker wanted to revoke about 2,000 franchise agreements as part of its restructuring to keep the remaining ones healthy. All of these stores were projected to go offline in October.
The clash between the automaker and dealers brought together forces from the National Automobile Dealers Association, the National Association of Minority Automobile Dealers and the Automobile Trade Association along with key federal lawmakers, including House Majority Leader Steny Hoyer and Assistant Senate Majority Leader Dick Durbin.
The Capitol Hill members pushed a plan that would have forced an arbitrator to balance the economic interests of the terminated dealership, the company and the general public when considering dealer reinstatement. Among the points Hoyer and Durbin emphasized late last year were:
—Dealership Profitability: Requires an arbitrator to consider a dealer's profitability over the last four years. This provision addresses concerns that the companies terminated dealerships that were otherwise profitable.
—Manufacturer's Overall Business Plan: Requires an arbitrator to consider how a dealership supports the company's post-bankruptcy viability plans.
—Dealership's Current Viability: Requires consideration of a dealership's economic viability — addressing concerns that some dealerships were adequately capitalized at the time of their termination.
—Dealership Performance in Relation to Manufacturer's Performance Criteria: Requires arbitrator to consider how a dealership performed in relation to the manufacturer's customary and regular business objectives, including vehicle sales, capitalization, profitability and customer service.
—Local Conditions: Requires an arbitrator to consider local conditions that have contributed to poor dealership performance like natural disasters and other local economic realities, on which companies have based previous reinstatements. It also requires an arbitrator to consider the impact that reinstating a particular dealership would have on other dealerships in proximity.
Now with this latest announcement, GM North America president Mark Reuss expressed his enthusiasm for avoiding arbitration with this batch of dealers that are to receive a Letter of Intent.
"We are eager to restore relationships with our dealers and get back to doing what we do best — selling cars and taking care of customers," Reuss emphasized.
"The arbitration process creates uncertainty in the market," he continued. "We believe issuing these Letters of Intent is good for our customers, our dealers and GM."
Ed Tonkin, chairman of the National Automobile Dealers Association, offered a statement after GM made its announcement.
"The announcement by General Motors of its intent to reinstate 661 dealers is a significant move forward in advancing the state of dealer relations," Tonkin asserted.
"We're eager to work with Mark Reuss and his team as they focus on restoring stronger ties with their dealers," Tonkin went on to say.
"We appreciate the good faith effort that GM is showing and hope that this carries forward in its continuing settlement and arbitration discussions with the remaining wind-down dealers," he added.