Many General Motors dealers in North Georgia were spared on Friday when General Motors Corp. told about 1,100 dealers — nearly 20 percent of its U.S. network — that they will be fired by the automaker late next year because their sales are weak.
Dealers who were dropped from the network were to receive a letter by noon Friday notifying them that their dealer agreement would not be renewed.
Jim Hardman, owner of Jim Hardman Pontiac, Buick and GMC in Gainesville, said his dealership will continue to do business on Browns Bridge Road. Hardman said he was not worried that it would turn out otherwise for him or his 50 employees.
"I had no doubt that we would not receive a letter," Hardman said.
Representatives from other dealerships in North Georgia said they also were spared, including Hardy Chevrolet and Moss Robertson Automotive in Gainesville, Universal Chevrolet in Cleveland, Hayes Chevrolet in Alto, John Megel Chevrolet in Dawsonville and Andean Chevrolet in Cumming.
A representative from John Bailey Pontiac, Buick, GMC in Buford did not immediately return calls seeking comment about the dealership’s future.
GM’s announcement is more bad economic news for dealers, communities and businesses still reeling from Chrysler’s similar nationwide dealer cuts a day earlier. Both automakers are scrambling to reorganize and stay alive in a severe recession that has devastated sales of cars and trucks.
"It’s a sad day for a lot of good people," Hardman said.
While GM doesn’t own the dealers, its network is too big, causing dealers to compete with each other and giving shoppers too much leverage to talk down prices and hurt the company’s future sales.
"Too many dealers, in actuality, are a problem," Mark LaNeve, GM’s vice president of North American sales and marketing, said in a conference call with The Associated Press.
But Marvin Mattson, general sales manager at Moss Robertson, said GM should let the market dictate which dealerships survive. Although the 27-year-old Cadillac dealership was not among the dealers axed by GM on Friday, Mattson said the company could have handled the current economic situation better
"GM is overreacting to the situation at hand," Mattson wrote in an e-mail to The Times. "We understand they are being pressured by the government to act. However, the way the manufacturers are doing this is unprecedented in American business history. They should let the free market dictate. It would reduce the dealer rank through natural attrition."
Though not a domestic automobile dealer, Butch Miller, vice president and general manager of Milton Martin Honda in Gainesville, said the elimination of GM dealers across the country was not going to help the manufacturer cut costs.
"It’s a total misconception, if not someone misleading the general public, that the dealer costs the manufacturer money," Miller said. "Anything an automobile dealer buys from the manufacturer he generally pays for in advance and the dealer pays the shipping. So to say they’re cutting costs by cutting dealers is a fallacy."
Miller said that the local and national economy depended on the success of domestic automobile manufacturers like Ford, Chrysler and General Motors, and that dealers were the biggest source of sales tax income for local governments.
"We need for Chrysler and GM to be successful as an economy," Miller said. "As a society, we need those manufacturers to be successful."
GM declined to reveal which dealers will be eliminated and left it up to franchise owners to report the decision to customers.
The cuts are part of a larger GM plan to drop 2,600, or nearly 42 percent of its 6,200 dealerships as the automaker tries to restructure outside of bankruptcy court and become profitable again. Thousands of jobs will likely be lost and governments will lose untold dollars in tax revenue as dealerships are forced to close.
Besides the 1,100 dealership cuts, the company will provide updates to about 470 Saturn, Hummer and Saab dealerships on the status of those brands, which it plans to sell.
Friday’s cuts will not be the last. GM said it expects to lose more dealers through attrition. Ultimately, about 90 percent of the remaining dealerships will stay with GM, the company said.
FedEx letters bearing the bad news began arriving Friday morning at GM franchises around the country. The letter, a copy of which was obtained by The Associated Press, states that dealers were judged on sales, customer service scores, location, condition of facilities and other criteria.
Terry Hayes, dealer principal for Hayes Chevrolet, said that sales in Alto and Toccoa saved the North Georgia dealership from job losses. Hayes employs between 70 to 80 workers at its three GM sites in North Georgia, he said.
"We are going forward and I’ve talked to GM personally and they are very pleased with us and we’re very pleased with them," Hayes said.
"We were never told or hinted to or anything that we had any problems with General Motors at all. Therefore, we weren’t really concerned."
GM executives met with local dealers Friday to "reassure the existing dealers that everything was fine and we would move forward," said Wayne Alexander, Hardy Chevrolet’s general manager.
Friday was bittersweet for Jim Otwell, president of Andean Chevrolet. Though he was relieved his dealership was spared, many of his friends at other stores weren’t as fortunate.
"Some of them are my friends and I’m kind of sad for them because they’ve worked a long time in the business, and to be told that they would no longer be in business, I was sad for them," he said.
"I’m thankful we weren’t one of the 1,100 dealers that received the letter today, and I’d say that I think it’s based on the sales numbers and that we’ve been here for 61 years and we plan to be here for many more years."
Shaun Streib, general sales manager for John Megel Chevrolet said "there was a little bit of relief," when he found out their dealership was safe.
"You’ve got to have that question in the back of your mind of is it possible," he said. "We’re always trying to do our best."
With fewer dealerships to compete with, Streib said his store hopefully can "pick up some extra new customers."
Streib said the dealership has seen a bit of a rebound.
"GM has been very good with giving us some good programs and some good incentives and everything to help stimulate a little bit."
The letter GM sent to dealers left open the possibility that the decision to close those locations could be reversed.
"Please understand that our planning in this regard is not finalized, and we are prepared to give you until the end of the month to submit any information you would like us to see," the letter said.
Both Chrysler and GM say they are cutting the number of dealers because they have too many outlets that are too close to each other, and the competition drives down prices. But as the ranks of dealers thin and competition decreases, that likely will mean higher prices for car and truck buyers.
As GM and Chrysler lost market share to Japanese and other overseas brands, the automakers, as well as Ford Motor Co., ended up with too many dealerships. Many are barely getting by and can’t afford to upgrade their facilities or hire the best personnel to compete with the Japanese, who have far fewer dealerships.
With fewer dealers, consumers won’t see as much competition, said Aaron Bragman, an automotive industry analyst with the consulting firm IHS Global Insight.
"No longer will people be able to shop between three or four dealers within 15 minutes of each other for the best cutthroat price," he said.
GM knows it will lose sales in the short-term, but over the long haul, fewer dealers will mean higher per-vehicle profits, Bragman said.
"As the dealers go, so goes the company in terms of financial health," he said.
In the 1980s, GM, Chrysler and Ford controlled more than 75 percent of U.S. sales, but that dropped to 48 percent last year. GM alone held nearly 51 percent of the market in 1962, but only 22 percent last year.
GM is expected to go into bankruptcy protection June 1, but it’s starting to negotiate deals ahead of the filing to speed up the Chapter 11 process.
"GM is only playing the cards that the federal government is dealing them," Miller said. "Since when does the federal government tell an industry that they have to fire the CEO in order to get help? That’s exactly what the federal government did to Rick Wagoner. ... The federal government running an industry? That’s not a good marketplace economy. It’s just not a good structure."