#Dealers

Chrysler is doing better than GM. At least when it comes to winning arbitration cases brought by culled dealers. GM lost both cases brought against them. Chrysler bats much better.

It’s a little-known fact that nearly half of the 2,000 or so dealer franchises that GM began winding down during bankruptcy were Cadillac stores, most of them located in rural areas. The General’s plan was to focus Cadillac’s dealer network on standalone stores in major metropolitan areas, following the strategies of more premium luxury competitors like BMW and Lexus. But having marked 922 largely small-town Caddy dealers for death, GM saw 2009 sales of its luxury brand fall 15 percent, or twice the rate of Buick and Chevrolet in the same period. The lesson: small-town Cadillac dealers (like attempts to sell the brand in Europe) are worthwhile after all. Automotive News [sub] reports, the majority of those dealers being reinstated are small-town Cadillac dealers. Will Cadillac’s brand integrity suffer by having to serve the small-town American market as well as competing with the European brands? Probably, but at least Caddy dealers can take heart knowing that things could still be worse: they could be Lincoln-Mercury dealers.

GM and Chrysler were already culling dealers before their bankruptcies, which hastened the process. Many of those dealerships were profitable businesses, often family owned, whether or not they were ultimately an asset to the parent automakers. Dealers have established regional brand equity, being major advertisers in their markets. The dealers losing their franchises have explored what few options they have. There are lobbying efforts at the state and national levels to protect the affected dealers with some kind of legislation. Some have signed up with Hyundai & Kia, as the low priced Korean automakers thrive in the recession. Others, recognizing that new car sales are often a wash, and that repair service and used car sales are profit centers, have stayed in business as used car dealerships or automotive service centers.

Now Sears Roebuck & Co. has offered some of those culled dealers another lifeline. Banking on the reputation of its DieHard battery brand as well as being one of the country’s leader tire retailers, Sears is launching the Independent Sears Auto Center franchise program, starting with a former Chrysler dealer in New Jersey, the Coleman Auto Group. Participating stores will offer Sears’ full automotive product line of batteries, tire, accesories as well as repair services and replacement parts.

We also recognize there is a market (for the Nano) not only in developing countries, but possibly in the developed countries. For the United States we need a car which has a larger engine and we need additional crash test modifications and we are in the process of doing it.

Ratan Tata at today’s India Auto Expo [via Automotive News [sub]], suggesting that the world’s cheapest car could eventually be sold in the US. Fiat is already partnering with Tata to jointly sell the Nano in Latin American markets, so there’s a chance that the Indian city car could eventually show up at Chrysler dealerships.

According to Reuters, GM has sent a letter to its dealers offering $7,000 for every new Saturn or Pontiac they can move to a rental or service fleet between now and January 4. The plan would essentially make dealers the first buyer of the remaining Pontiacs and Saturns, which would then be operated as fleet vehicles or be sold as low-mileage used cars. In any case, the single objective is clear: get those dead brands off the books at all costs. With 7,900 vehicles left at Pontiac as of the 14th of December and upward of 5,000 left at Saturn as of the beginning of the month, the cost to GM could easily approach $100m. But as they say in the advertisements, their loss is your gain…. as long as you’re interested in one of the G6s or Auras that dominate the dead-brand straggler inventory. Where’s Oprah when you need her?

As soon as GM and Chrysler agreed to review their dealer cull decisions, the culled dealers in question began complaining that the review would not improve their situations. According to the aggrieved dealers, the new review would be based on the same allegedly flawed data as the initial cull, meaning nothing would be changed. By GM’s own admission, only 39-51 of the over 1,000 dealers cut would even stand a chance at reinstatement. Now, Automotive News [sub] reports that a new measure has passed the House of Representatives which would allow dealers to “present any kind of relevant information during the arbitration.” The measure comes in the form of an amendment to the House Financial Services bill, which is headed to a conference committee in which House and Senate leaders must arrive at a compromise in order to send the bill to President Obama.

As congress nears the end of the 2009 legislative session, culled GM and Chrysler dealers are pushing hard for the rapid passage of the Automobile Dealer Economic Rights Restoration Act. Meanwhile, nearly two dozen members of the Senate Commerce Committee from both parties are calling on GM and Chrysler to resolve outstanding disputes with culled dealers in hopes of defusing the situation by non-legislative means.

Given the federal government’s ownership stake in Chrysler and GM, it is our shared obligation to ensure all impacted dealers are treated as fairly as possible. We continue to urge you to take all actions necessary to uphold the assurances you provided earlier, as well as to achieve a mutually agreeable and timely outcome to the negotiations between Chrysler, GM and the dealers. Chrysler and GM’s unprecedented bankruptcy has greatly impacted dealers, consumers, employees, small businesses, and communities across the country. It is crucial that outstanding issues be resolved as expeditiously and efficiently as possible to provide the least amount of hardship to Chrysler, GM and the dealers.

GM’s response to the senatorial call out? “Those discussions are still underway,” according to spokespeople, who refused to characterize the discussions for Reuters. Meanwhile, two examples of possible mitigating action by GM and Chrysler are not off to good starts.