Some Money for owners,
GM payouts average $900,000
Dealer franchises say cash from automaker won't cover closing and severance
Jun 10, 2009 04:30 AM
Tony Van Alphen
Business Reporter
General Motors of Canada dealers losing their franchises under the automaker's survival plan will receive an average $900,000 each under terms of a confidential offer, but they say it won't cover steep closing costs in many cases.
A copy of GM's "wind down agreement" obtained by the Toronto Star reveals cash compensation for Canadian dealers based on 2008 sales of new vehicles plus an allowance of up to $35,000 for the removal of store signs. Small dealers will get $1,600 for each sale; middle-level owners will receive $1,800 per car and big stores $2,000 a vehicle.
The automaker would not reveal last year's individual dealer sales and the range of compensation for small and big retailers, but industry statistics show GM stores sold an average of 497 vehicles last year.
That would work out to a payment of almost $900,000 plus the signage allowance to closing dealers with average sales.
At the same time, one Toronto region dealership manager, who spoke on condition of anonymity, noted yesterday many mid-level retailers generated sales much lower than that figure and would qualify for less than the average payout.
The agreement contains a ``confidentiality" clause prohibiting dealers from discussing the contents publicly without GM's consent.
Another dealer said GM's payments could range anywhere from less than $200,000 to more than $1.5 million, but it could still leave them with losses after paying shutdown costs. Staff severance costs would alone push some owners into bankruptcy, he said.
Other dealers said colleagues that spent heavily to upgrade stores in recent years because GM insisted on "imaging" now won't be able to recover their investments and are bracing for financial ruin.
GM would not disclose the overall bill for the downsizing but if average sales are an indication, the cost could easily surpass $200 million.
GM, whose sales have plunged in the past year, informed about 240 dealers last month it would not renew their franchise agreements when they expire in October next year because the automaker needs to become more viable quickly. The company also plans to trim its network by another 50 stores through attrition before the end of 2010.
The federal and Ontario governments had pressed GM to announce cuts in its dealer network before a May 31 deadline to qualify for $10.5 billion in loans.
In letters accompanying the offers, GM said it had identified necessary "attributes" for future dealers and reviewed "sales effectiveness," customer-satisfaction scores, capitalization, profitability, location, facilities, market factors and an analysis of the operation.
"The dealer network consolidation is far more complex than most people appreciate," GM Canada spokesperson Stew Low said yesterday.
"It takes time to do the analysis to ensure we did the best job possible given the unique markets across the country."
In exchange for the payments, GM placed several conditions that include releasing the company from liabilty and agreeing not sue the automaker.
Under the agreement, dealers would close by the end of this year rather than next fall and receive four payments, including a final one of 55 per cent.
Government sources say more than 80 per cent of dealers who received the offer signed it after consulting with counsel. Some will remain open as independent used auto dealers.
Dealers complained about the compensation in view of closing costs; the pressure to accept the offer within six days; the number of closings and decisions on some stores.
A senior executive at a Toronto-area dealer that received a termination notice said GM's criteria for keeping some dealers open and closing others doesn't seem to make any business sense.
"How GM can choose to terminate some of their most successful retailers – when every sale counts – over some of their lesser performing dealers is beyond me."
Government loans will save GM and thousands of assembly and parts jobs but the store closings will kill more than 12,000 jobs at dealerships across the country, he said.
GM payouts average $900,000
Dealer franchises say cash from automaker won't cover closing and severance
Jun 10, 2009 04:30 AM
Tony Van Alphen
Business Reporter
General Motors of Canada dealers losing their franchises under the automaker's survival plan will receive an average $900,000 each under terms of a confidential offer, but they say it won't cover steep closing costs in many cases.
A copy of GM's "wind down agreement" obtained by the Toronto Star reveals cash compensation for Canadian dealers based on 2008 sales of new vehicles plus an allowance of up to $35,000 for the removal of store signs. Small dealers will get $1,600 for each sale; middle-level owners will receive $1,800 per car and big stores $2,000 a vehicle.
The automaker would not reveal last year's individual dealer sales and the range of compensation for small and big retailers, but industry statistics show GM stores sold an average of 497 vehicles last year.
That would work out to a payment of almost $900,000 plus the signage allowance to closing dealers with average sales.
At the same time, one Toronto region dealership manager, who spoke on condition of anonymity, noted yesterday many mid-level retailers generated sales much lower than that figure and would qualify for less than the average payout.
The agreement contains a ``confidentiality" clause prohibiting dealers from discussing the contents publicly without GM's consent.
Another dealer said GM's payments could range anywhere from less than $200,000 to more than $1.5 million, but it could still leave them with losses after paying shutdown costs. Staff severance costs would alone push some owners into bankruptcy, he said.
Other dealers said colleagues that spent heavily to upgrade stores in recent years because GM insisted on "imaging" now won't be able to recover their investments and are bracing for financial ruin.
GM would not disclose the overall bill for the downsizing but if average sales are an indication, the cost could easily surpass $200 million.
GM, whose sales have plunged in the past year, informed about 240 dealers last month it would not renew their franchise agreements when they expire in October next year because the automaker needs to become more viable quickly. The company also plans to trim its network by another 50 stores through attrition before the end of 2010.
The federal and Ontario governments had pressed GM to announce cuts in its dealer network before a May 31 deadline to qualify for $10.5 billion in loans.
In letters accompanying the offers, GM said it had identified necessary "attributes" for future dealers and reviewed "sales effectiveness," customer-satisfaction scores, capitalization, profitability, location, facilities, market factors and an analysis of the operation.
"The dealer network consolidation is far more complex than most people appreciate," GM Canada spokesperson Stew Low said yesterday.
"It takes time to do the analysis to ensure we did the best job possible given the unique markets across the country."
In exchange for the payments, GM placed several conditions that include releasing the company from liabilty and agreeing not sue the automaker.
Under the agreement, dealers would close by the end of this year rather than next fall and receive four payments, including a final one of 55 per cent.
Government sources say more than 80 per cent of dealers who received the offer signed it after consulting with counsel. Some will remain open as independent used auto dealers.
Dealers complained about the compensation in view of closing costs; the pressure to accept the offer within six days; the number of closings and decisions on some stores.
A senior executive at a Toronto-area dealer that received a termination notice said GM's criteria for keeping some dealers open and closing others doesn't seem to make any business sense.
"How GM can choose to terminate some of their most successful retailers – when every sale counts – over some of their lesser performing dealers is beyond me."
Government loans will save GM and thousands of assembly and parts jobs but the store closings will kill more than 12,000 jobs at dealerships across the country, he said.
