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DETROIT — Up to 20 General Motors Corp. dealerships have been spared the death penalty after the company reviewed their cases and reversed plans to end their franchise agreements, a top GM executive said Tuesday.
Mark LaNeve, GM's North American vice president for sales and marketing, said in an interview with The Associated Press that about 500 dealers had appealed the company's decision to eliminate them, with 15 to 20 of those appeals granted.
Some of the closures were upheld by a panel of GM officials, while others are still being evaluated, LaNeve said.
Last month, GM announced it would not renew the franchise agreements of 1,100 underperforming dealerships nationwide by next fall. GM said its 6,000-dealer network is antiquated with many dealers competing with each other in close proximity, driving down prices. Many are losing money, can't afford to advertise much, and their facilities are inferior to GM's competitors, the company said.
Dealers were judged on whether they met sales goals, customer service scores, the condition of their buildings and other criteria.
But LaNeve said in some cases, GM made mistakes, which is possible when dealing with so many dealers.
"If we made a mistake on a performance metric, or there were extraordinary circumstances causing that performance, in fairness to the process, we wanted the opportunity to reverse that decision," he said.
GM, which has received $20 billion in government loans, is scrambling to restructure under Chapter 11 bankruptcy protection. Crosstown rival Chrysler LLC made a similar decision to eliminate 789 dealer franchises, and a New York bankruptcy court judge allowed the decision on Tuesday.
LaNeve said he expects similar legal challenges to the GM cases, although GM is giving the dealers far more time to sell inventory and wind down their franchises. Chrysler dealers had only a few weeks before their franchises ended, with a deadline to cease representing the company on Tuesday.
The court cases have already begun. Two South Dakota car dealers have sued GM, claiming state law bars the Detroit automaker from ending its franchise deals with them, at least without a hearing. The lawsuit was filed in Sioux Falls federal court, before GM's bankruptcy filing.
Legal experts say bankruptcy proceedings often trump state laws such as those protecting dealer franchises.
GM dealers that the company wants to keep were given "continuation agreements" to sign by Friday with criteria to meet to keep their franchises. Those to be let go were given "wind down" agreements.
LaNeve said 88 percent of the dealers to be kept have agreed to sign on, either verbally or by filing the paperwork. Seventy-four percent of dealers to be axed also have committed, he said.
Chrysler had a shorter time frame than GM to shed its unwanted dealers because it's under a tighter timeline to prepare itself for a government-ordered takeover by Italy's Fiat Group SpA, said Mike Boudreau, director at the turnaround firm O'Keefe & Associates.
GM can take longer to phase out dealers because it isn't facing a similar deadline.
"They don't have a mandated marriage partner," he said. "As a result, they've got a little bit more time. They're simply taking a different approach. Their approach is they're trying to get a softer landing for their dealerships."
As a result, GM may also be able to avoid the political and legal backlash that Chrysler has had to confront.
"Chrysler is kind of getting crucified for a quick slam-bam approach," he said.
But even though GM has offered its unwanted dealers more time to wind down, the dealers may be forced to close faster than expected, said Jeremy Anwyl, chief executive of the auto Web site Edmunds.com. Anwyl said that GM could simply lump its unwanted dealers in its pile of "bad" assets to be jettisoned as it reorganizes into a new company under Chapter 11, allowing the automaker to shed dealers much quicker.
"I can't imagine GM is going to ship these dealers to the new GM," he said. "Why would you bring on a dealer that you're planning on terminating?"
GM also agreed to change the conditions it imposed for dealers to stay with the company. LaNeve said the company will work out sales and other performance targets with the dealers in the first quarter of next year, and they'll also decide together the time frame for facility upgrades.
Some dealers were upset by the changes, with many approaching state government officials to complain. Louisiana's attorney general said Monday that GM had agreed to discuss concerns, including a new rule that bars dealerships from suing the automaker.
The National Automobile Dealers Association said it supports the changes.
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AP Auto Writer Dan Strumpf in New York contributed to this report.
