GM to force up to 1,200 dealers to close, plans to sell Saturn this year

GM told the dealers about the plan in a video conference, according to a dealer who spoke on condition of anonymity because the video conference was private. It is part of the company’s plan announced Monday to cut more than 2,600 dealers by 2010.

GM’s Saturn brand will either be sold or phased out by the end of this year, nearly two years faster than previously announced, the brand’s top executive said Tuesday.

Saturn General Manager Jill Lajdziak said the brand, once billed as a different kind of car company, most likely will be sold, given the interest of several buyers who have surfaced. She says GM will take other bids for the brand until June 1.

GM has said it wants to sell or get rid of Saturn, Hummer and Saab as it restructures, so it can once again become profitable.

The company expects to lose 500 Hummer and Saturn dealers when those brands close or are sold, and it expects 400 dealers to close voluntarily. Another 500 would be consolidated into other dealerships, according to the dealer.

GM said Monday that it also would eliminate its Pontiac brand, but there are only 27 dealers that sell just Pontiacs, according to the National Automobile Dealers Association. Most Pontiac dealers also sell Buick and GMC vehicles at the same location.

Company spokeswoman Susan Garontakos confirmed the numbers and said GM is in the process of deciding which dealers to keep based on their sales performance, capitalization, potential profitability, size, image and customer satisfaction scores.

After that, she said, the company will go market by market and determine which dealerships are not meeting the terms of their franchise agreements.

"There’s a lot of things that we have to consider, but we’ll have talks with those dealers that show or haven’t demonstrated that they have maintained a good performance," Garontakos said.

John McEleney, chairman of the NADA, said in a written statement that GM must treat all of its dealers fairly and those that close should be compensated.

"It’s not out of any fault of their own that these dealers are being forced to close their businesses," McEleney said.

He said many details were unknown about how the dealerships will be closed, but "137,330 dealership employees will lose their jobs, and state and local governments will lose an estimated $1.7 billion in sales tax revenue that would have been used for economic development in communities around the country."

GM announced Monday it plans to reduce dealerships by 42% from 2008 to 2010, cutting them from 6,246 to 3,605.

GM is living on $15.4 billion in government loans and faces a June 1 government deadline to complete restructuring moves, win concessions from its unions and cut its debt. If it fails to meet the deadline, it will go into Chapter 11 bankruptcy protection.

Gm plans to focus on four core brands: Chevrolet, Cadillac, GMC and Buick.

Saturn sale moved up

In February, the company said it would keep Saturn going through the end of the 2011 model year, which is late summer in 2011.

But because of the interested buyers and demands to restructure faster, GM decided to pull the sale deadline forward, Lajdziak said.

Saturn’s Lajdziak would not say when GM expects to announce a Saturn sale, but conceded the company will be on a fast timeline to complete a deal by the end of the year.

"We remain confident given the expressions of interest we’ve already had," she said.

Among the bidders for Saturn is a group led by Oklahoma City private equity firm Black Oak Partners. The group said in a statement that it would get vehicles from GM initially, but it expects to sell smaller, fuel-efficient vehicles from other global manufacturers using Saturn’s well-regarded dealership network.

GM started Saturn in 1990 as a small-car answer to Japanese automakers and billed it as a "different kind of car company." Its new factory in Spring Hill, Tenn., had more flexible work rules than traditional GM plants and more autonomy for those who built the cars, known for their plastic body panels.

Despite a cult-like following that drew thousands to annual reunions in Spring Hill, the brand never made money for GM.

As GM focused more on high-profit pickups and sport-utility vehicles, Saturn began to languish in the late 1990s. But in 2006, it started getting the best of GM’s new models, and executives viewed it as a precursor for GM’s restructuring effort.

After a good year in 2007, sales dropped 22% last year as the U.S. market withered.

Sales were off 59% for the first three months of this year compared with the same period in 2008. Lajdziak said the brand fell with the rest of the slumping U.S. auto market, but Saturn was hit further due to publicity about its potential sale or demise. U.S. auto sales were down 38% from January through March.

Some Saturn dealers have given up their franchises since the company announced last year that it was putting the brand up for sale.