General Motors Corp. told its dealers Tuesday that it will force 1,000 to 1,200 under-performing locations to close their doors, but if it wants to include any of its 45 Utah dealerships in that number it is going to have to pay.
Utah automobile dealers are protected by one of the "more thorough" state franchise laws in the country, said Craig Bickmore, executive director of the Utah New Car Dealers Association.
"I don't know that they would have a harder time closing dealerships here [in Utah] if that is what they intend to do," Bickmore said. "If they do chose that course, though, they're going to have to compensate the dealers."
And that could prove expensive for a company that is living on $15.4 billion in government loans and faces a June 1 deadline to complete restructuring moves, win concessions from its unions and cut its debt. If it fails to meet the deadline, GM could find itself in bankruptcy.
Bickmore said many of GM's Utah dealers have invested millions in their businesses.
"They have built their own buildings, paid for their inventory of parts and have either purchased or financed all the automobiles on their lots," he said. "They have poured their blood, sweat, tears and capital into their dealerships."
So if a manufacturer such as GM decides it wants to eliminate a dealership, it just can't walk away. "In Utah, our law says manufacturers have an obligation back to the dealer and there ought to be some
compensation" if they want to take away a franchise.
GM spokeswoman Susan Garontakos said the company is in the process of deciding which dealers to keep based on their sales performance, capitalization, potential profitability, size, image and customer satisfaction scores.
John McEleney, chairman of the National Automobile Dealers Association, 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."
GM also announced this week it intended to eliminate its Pontiac brand, but there are only 27 dealers nationwide that sell just Pontiacs, according to the NADA. Most Pontiac dealers also sell Buick and GMC vehicles at the same location.
Still Brian Crump of Crumps Pontiac Cadillac GMC in Tremonton said he hates to see the brand go since it makes up a significant share of his dealership's annual sales.
"Pontiac is the No. 1 selling brand here in Tremonton and there are going to be a lot of people who are disappointed when it goes away," he said.
Crump said since there is another GM dealership in Tremonton -- Murdock Chevrolet Buick -- he is not in a position to pick up any other GM brands. "We'll still have GMC trucks and Cadillac so we'll just have to work harder selling those, along with some used cars."
While he concedes that the Tremonton market "is probably too small to support two GM dealerships" Crump said he has no idea what GM may decide to do, if anything.
"You have two GM dealerships here and neither one of us is going to want to just give up," Crump said. "And we are supported by one of the strongest franchise laws in the country."
