General Motors takes Dealerships to Court Over Selling Foreign Cars

By Automotive Staff | January 28, 2009
Things are tough all over and unusual times call for unusual solutions. Car dealerships around the country are experiencing a major squeeze. Simply put they can’t sell cars due to all sorts of factors of which they have no control. But one thing they do have control of is their dealerships themselves. So, in order to survive, car dealers of the domestic automakers have been expanding into offering models from rival carmakers. Needless to say domestic companies like General Motors don’t like that. The company feels that offering products from rival companies hurts the sales of GM vehicles. The car dealership owners say it is just a matter of survival. In response to the dealers, GM is reported to be going to the courts to force its dealers to live by the franchise rules. This could force some dealerships out of business at a time when GM and the other domestic manufacturers want to pare down their dealer networks. General Motors now has more than 6,400 U.S. dealers and it wants to cut that number drastically. Eliminating dealers isn’t easy because most states have franchise laws that protect them. These laws call for manufacturers to buy dealers out if it wants to close them. Such an endeavor can be rather costly. For example, when GM closed down the Oldsmobile brand, it had to pay Olds dealers a settlement totaling about $1.2 billion. That’s a cost GM can’t afford to take on right now. Multi-dealerships are not new. But now with times being as tough as they are it offers a way for dealerships to hedge their bets and survive. But it also provides an opportunity for the automakers like GM to take aggressive action to cut down its dealer network. My two cents. Wait a minute. Doesn’t GM offer product built by a Korean automaker -- Kia? And what about the partnerships that are now developing between automakers where different companies share models that are re-badged or share platforms or technology. It can be difficult to determine what is and what is not a GM car? So multi-dealers could be selling GM cars in all of their dealerships. Our take? Times are tough. We’re all in the same boat. Why not give each other a break! via Detroit News
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