The Michael Hohl General Motors dealership in Carson City survived the cuts
announced by GM on Friday, but Michael Hohl Carson Valley Chevrolet in
Minden may not be so lucky.
Steve Conroy, operations manager for Michael Hohl Automotive Group, said
they were relieved to hear their Carson City dealership escaped the cuts.
Carson Valley Chevrolet, however, did receive notice that GM doesn't plan to
renew their dealership agreement at the end of 2010. Conroy explained that
this doesn't mean for certain that the dealership will close.
"We have a great relationship with GM, and we think we can appeal that and
get them to repeal that decision," Conroy said.
Hohl purchased the Minden dealership from Carson Valley Chevrolet in February 2007. That company purchased the dealership from the Hellwinkel family in 2003.
Until then, the C.O.D. Garage was one of the oldest operating commercial garages in the United States. The garage also holds the record for the oldest AAA touring service in Nevada and one of the oldest Chevrolet and Buick franchises in the United States.
It was founded by Clarence O. Dangberg in 1911.
Conroy also said that Scott Motors in Reno was also on the list of GM cuts,
which would leave Michael Hohl as the only Cadillac dealer in the region.
On Friday, GM told about 1,100 of its dealers " one in five " that they
would be dropped, adding to the economic pain radiating from the beleaguered
Detroit automakers to cities and towns across the country.
Including Chrysler's decision a day earlier to eliminate a quarter of its
own, about 1,900 dealerships " many pillars of their communities and heavy
advertisers for local media " learned in a matter of 48 hours that they
would be forced either to sell fewer brands or close altogether.
While GM doesn't own the dealers, the company says its network is too big,
causing dealers to compete with each other and giving shoppers too much
leverage to talk down prices and hurt future sales.
Several hundred of the GM dealers knew already they were headed for closure,
but most of them learned for the first time Friday. An industry group says
the GM and Chrysler cuts combined could wipe out 100,000 jobs.
Both GM and Chrysler are scrambling to reorganize and stay alive in a severe
recession that has pummeled car and truck sales for U.S. automakers, which
had already been losing market share to foreign companies for decades.
Chrysler LLC is already in bankruptcy protection, and industry analysts say
General Motors Corp. is making its cuts now in preparation for a bankruptcy
filing June 1. The company says it would prefer to restructure out of court.
GM declined to reveal which dealers will be eliminated. Many dealers vowed
to fight, first through a 30-day company appeal process, then possibly in
court.
GM's dealers are protected by state franchise laws, and the company concedes
it would be easier to cut them if it were operating under federal bankruptcy
protection. GM says it's trying to restructure outside of bankruptcy because
of the stigma of Chapter 11.
Chrysler dealers have fewer options because the company has already filed
for bankruptcy protection, and federal bankruptcy judges generally trump
state law. And Chrysler said on Thursday that its cuts were final.
GM outlined a plan to cut about 40 percent of its 6,000-dealer network by
the end of 2010 in hopes of getting the company back on its feet. Besides
the 1,110 dealership cuts, the company will shed about 500 dealerships that
market the Saturn, Hummer and Saab brands, which GM plans to phase out or
sell.
And when the surviving dealers' contracts are up in late 2010, GM will cut
still more by not offering renewals to about 10 percent of the dealers who
are left. Dealers could stay open selling used cars or other brands, but GM
and Chrysler cuts will still leave cities across the U.S. with empty
buildings, vacant lots and perhaps hundreds of thousands of dollars in lost
tax revenues.
FedEx letters bearing the bad news began arriving Friday morning at GM
franchises around the country. The letter states that dealers had been
judged on sales, customer service scores, location, condition of facilities
and other criteria.
While the targeted dealers represent about 20 percent of GM's total, they
make only 7 percent of its sales, the company said.
The cuts will allow the surviving dealers to expand the size of their
markets, so they have a better chance of staying healthy and attracting
private investment, said Mark LaNeve, GM's North American vice president of
sales and marketing.
"Over time, they just can't afford to invest in their business to the degree
the competition has," LaNeve said.
Toyota, for example, generally has larger and newer showrooms and service
departments than GM and Chrysler dealers making those dealerships more
attractive to potential buyers.
The Obama administration's auto task force, which is overseeing the GM and
Chrysler restructuring because both have received billions of dollars from
the government, was aware GM would cut dealers, LaNeve said. But he stressed
the company made the decision on how many and where.
Chrysler is aiming to close its nearly 800 dealers by June 9, and those
outlets may try deep discounts to clear out their remaining inventory. But
in the long run, prices for cars and trucks will probably rise for customers
as dealerships disappear.
"No longer will people be able to shop between three or four dealers within
15 minutes of each other for the best cutthroat price," said Aaron Bragman,
an automotive industry analyst with the consulting firm IHS Global Insight.
As GM and Chrysler lost market share to Japanese and other overseas brands,
they ended up with too many dealers. So did Ford Motor Co., which has
managed to stay healthier than either of its Detroit siblings.
In the 1980s, GM, Chrysler and Ford accounted for 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.
