GM plan worries new-car dealers Automaker wants franchisees to sell only its nameplates

October 11, 1995|By TED SHELSBY | TED SHELSBY,STAFF WRITER

Car dealers here and across the country say they are concerned about General Motors Corp.'s announcement Monday that it intends to revise the rules governing the "dualing" mix of its dealerships that sell competitors' products.

"It is definitely a major concern to us," said Ted Orme, a spokesman for the National Automobile Dealers Association. "We have our convention Oct. 18 and 19 in Phoenix, and this will be the top item on the agenda."

NADA, based in Washington, is a trade group that represents 19,500 of the nation's approximately 22,500 dealerships.

Mr. Orme said that details of GM's plan are still sketchy and that the trade group wants to reserve further comment until it can review the entire plan.

"This is a very sensitive issue, and we want to come up with a carefully thought out policy," he said.

The issue is sensitive because it may pit dealer against dealer, with some big winners and some big losers, said Leon Edwards, president of Edwards Chevrolet in Birmingham, Ala., and the current NADA president.

"If there are six dealers in town and GM closes one or two of them, the four or five left will fare better," he said. "Everyone will fare better -- unless you are among the one or two taken out."

William A. Hurwitz, president of Fox Automotive Inc., which operates eight domestic and foreign dealerships in the Baltimore area and Laurel, said GM's proposal is disturbing.

"It upsets me," he said. "I believe the future of this business rests with the ma-and-pa stores disappearing and the big guys getting bigger. This puts a damper on that."

In a letter to dealers Friday, Ronald L. Zarrella, a GM vice president and its marketing czar, said the dealership network strategy is simple: Where market conditions allow a profitable dealership, GM should have a single-line exclusive dealership.

"Each brand needs to be properly presented to the public through a renewed emphasis on having the right number of dealers, at the right locations and of the right size, to profitably meet the sales and service expectations of our customers."

The plan could trim the number of GM dealers to about 7,000 from the current 8,400.

Available choices

Tom Klipstine, a GM spokesman, said the company's first choice is to have stand-alone General Motors exclusive products. An exception, he said would be to pair Pontiac with GMC trucks.

"If that doesn't work or we can't support that, the next step is to have a dualing pattern of Buick joining Pontiac and GMC trucks," he said. "Oldsmobile would join with Cadillac or possibly Chevrolet."

In rural areas, where it would be difficult for a dealer to be profitable with a single line of cars, Mr. Klipstine said the company's preference would be to put Chevrolet, Buick, Pontiac and Oldsmobile dealerships under one roof.

He said that Cadillac and GMC trucks would not be represented in those areas, and that Saturn will remain a single-line exclusive dealership.

Asked if GM was prepared to buy out some dealers, Mr. Klipstine said the company would have to "look at all options" at individual dealerships.

"Whether that means buying out some dealers, it may and it may not," he said.

He said GM is looking at each region as an independent location. "We are not going to say we have a pattern that works in St. Louis, so therefore it should work in Baltimore."

Mr. Klipstine said most GM dealer franchises are renewed every five years. Some dealers speculate that GM will use the occasion pressure dealers into making the changes it wants in their operations.

Efficiency issues

Mr. Hurwitz, of Fox Automotive, said the most profitable way to sell cars is to have as many models as possible under one roof because that reduces the cost of doing business.

Mr. Hurwitz said he has been entertaining the idea of dualing Kia, a car made in South Korea, with one of his GM lines, but, "I won't be able to go through with that. It's their game, and we have to pay by their rules."

Mr. Hurwitz said that GM is a stronger company today than it was five years ago and that "they demand more from their dealers as they get stronger."

According to Tom O'Donnell, president of O'Donnell Pontiac, Oldsmobile, Volvo, GMC Trucks, Isuzu, Honda and Acura, "GM is going to need a lot of money" to implement its plan.

Using a hypothetical case, he said he didn't understand how GM could give its blessing to a dealer that was selling Chevrolets and Isuzus in the same showroom five years ago and suddenly say the rules have changed.

XTC Jeffrey A. Legum, president of Westminster Cadillac-Oldsmobile-Chevrolet, said he doesn't think GM's plans will have an impact on his operation.

"It doesn't effect us," he said. "We are a rural dealers with the mix they are recommending."

Joseph P. Carroll, executive director of the Maryland New Car and Truck Dealers Association, said he has not received any complaints from GM dealers in the state. He attributed that, in part, to dealers not having enough information about the proposal.

"This is a national issue," said Mr. Carroll, "It's not a Maryland issue. That is why we will be looking to the NADA for guidance."

But Mr. Carroll noted that Maryland has strong laws protecting franchise arrangements.

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