GM dealers get automaker to drop plan for more control

Company considered buying dealerships

November 02, 1999|By BLOOMBERG NEWS

DETROIT -- General Motors Corp., the world's largest automaker, has backed away from a plan to buy and run as many as 770 dealerships throughout the United States, after the company's dealers mobilized against the plan.

GM and Ford Motor Co. have tried to take greater control of their dealer networks. All automakers want to streamline vehicle distribution and selling, which analysts say account for as much as 27 percent of a new vehicle's price.

Dealers fought GM's initiative, viewing manufacturer-owned dealerships as a threat to their survival. Laws in 26 states restrict or ban automakers from owning retailers of their vehicles.

"What you're seeing here is an attempt to backpedal on this issue," Frank Ursomarso, owner of Union Park Pontiac-GMC in Wilmington, Del., said yesterday. "I had talked to [GM Chairman] Jack Smith a week ago, and he indicated he didn't want to be in the business of owning retail stores."

In September, GM created a retail unit, General Motors Retail Holdings, headed by Darwin Clark. The company said it could buy and run as many as 10 percent of its 7,700 U.S. dealerships within a decade to reduce distribution costs.

Last month, James Willingham, chairman of the National Automobile Dealers Association, said that if GM didn't drop or change its plan, the group would lobby state legislators to pass or tighten laws that restrict carmakers from selling their vehicles without a licensed dealer.

Ronald Zarrella, president of GM's North American operations, said last week that the Detroit-based company never intended to run its own dealerships.

"What we indicated was that in certain circumstances, we would partner with key retailers," Zarrella said. "We're not going to do anything that would jeopardize the success of the entire franchise system."

GM shares fell $1.5625 to $69.875 on the New York Stock Exchange yesterday. The company's plan was reported earlier in the trade publication Automotive News.

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