GM sees room to consolidate luxury dealerships

GM sees room to consolidate luxury dealerships

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GM sees room to consolidate luxury dealerships - 2/11/2008 10:42:36 PM

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General Motors Corp will step up consolidation of dealerships handling its three luxury brands in a bid to shore up profitability, the automaker's chief executive said on Saturday.

GM Chief Executive Rick Wagoner said the top U.S. automaker had made progress in helping to steer mergers of dealerships offering its Buick, Pontiac and GMC brands but needed to do the same now to restructure the retail network for its Cadillac, Hummer and Saab brands.

"We want to run a little harder at our luxury side," Wagoner told reporters on the sidelines of the annual convention for U.S. auto dealers.

All three Detroit-based automakers have grappled with the problem of how to reduce the number of their franchised dealers in recent years as they cut labor costs and slower-selling models in the face of slack sales and declining market share.

GM has also faced some criticism for running too many separate and partly overlapping product lines with its current stable of eight brands, including Chevrolet and Saturn.

But Wagoner said that rather than reduce the number of those brands, GM was focused on restructuring its retail sales network around them.

For example, GM has set a goal of selling 80 percent of its Buick, Pontiac and GMC vehicles through stores handling all three brands this year. Wagoner said GM was just at the beginning of a similar consolidation for its luxury brands.
"Where we have a lot of stand-alone stores for Saab and Hummer, we think it will make sense to move," he told reporters.

Analysts have warned that U.S. car makers need to cut U.S. dealerships -- particularly in crowded city markets -- in order to drive more sales through remaining stores and free up funds for advertising and new investment.

In a related move, at the San Francisco-based convention of the National Automobile Dealers Association privately held Chrysler LLC briefed its dealers on its own plans to shrink its retail outlets and shed vehicles from its line-up that compete against each other.

Although the Detroit automakers moved quickly to slash labor costs for 180,000 U.S. factory workers under a landmark contract negotiated last year, progress in restructuring their retail networks has been slower.

Weaker dealerships are typically family-owned businesses where the owners have to be enticed to sell out by a one-time payout to sever their ties to the brand, executives have said.

GM has cut over 600 affiliated dealers over the several years, including some 260 last year, which took its U.S. dealer count to about 6,750 outlets at the start of 2008.

But Wagoner also noted GM's ongoing overhaul of the Buick, Pontiac and GMC sales network has taken about five years and said moving too quickly to shed stores also carried risks.

"If you try to push it too hard you're going to get dealers nervous and not focused on what you want them to focus on and it's going to cost a lot more money," he said.

Reuters