GM Canada Confirms About 245 Dealers Getting Termination Notices
Posted May 20, 2009 12:00 pm.
This article is more than 5 years old.
General Motors of Canada has told about two in every five of its dealers that their relationships with the automaker will end by October 2010.
Many are expected to close this year, in a retail pullback affecting as many as 10,000 jobs.
GM sent emails Wednesday to about 245 of its 709 Canadian dealerships, and ongoing consolidation is expected to increase the number of shuttered locations further by the end of 2010.
Spokesman Stew Low said the automaker would not publicly identify dealers facing the axe, but he said they are primarily in large cities.
GM has five-year sales and service agreements with its dealers which all expire in October 2010, but “a good portion of the dealers will be wound up by the end of this year,” Low said.
“This all comes down to individual conversations with dealers, because each situation is unique.”
General Motors stated that the “rationalization” is focused on key urban markets, and it aims to accomplish the reduction “in an orderly, cost-effective and customer-friendly way.”
The announcement – following its termination notifications last week to 1,100 U.S. dealers – came as the automaker continued talks to extract further concessions from its Canadian unionized workforce.
The main dealership cuts are in the metropolitan areas of Toronto, Montreal and Vancouver and in other large cities.
“There will be some rationalization in smaller communities as well,” based on “retailing fundamentals,” Low said.
“You look at where the dealer’s located, you look at the age of the facility, you look at whether that community is growing or not.”
GM stated that the cull will give it “a more competitive dealer network with higher volumes, while continuing to maintain the strongest and broadest dealer network in the country.”
While General Motors of Canada has cut its direct workforce to 12,000 people, the dealer chain is estimated to employ 33,000.
“The economic implications, of course, are huge,” said Michael Hatch, chief economist at the Canadian Automobile Dealers Association, who estimated 10,000 jobs could disappear.
“People look at the auto sector, sometimes, and they think it’s just Detroit and Oshawa and Windsor, but dealerships are the retail presence.”
However, Hatch noted that GM’s action is focused on urban centres.
“They’re going to maintain their national presence,” he said.
“It’s a lot easier to serve the population of a big city having eliminated a few than it would be in rural areas, where if you eliminate a dealership that’s the only one within a four-hour radius you’re compromising your competitiveness,” he added.
“In urban centres, in the GTA for sure, there’s room for some consolidation.”
The Canadian Auto Workers, meanwhile, said negotiations with GM Canada were continuing with no indication of when or how they might conclude.
The union had said Tuesday that the “incredibly intense” talks were “approaching a moment of truth.”
Federal Industry Minister Tony Clement said his officials have told him progress has been made.
“As long as we’re moving in the right direction, not the wrong direction, I’m willing to be patient on this,” Clement told reporters in Washington, where he was discussing the auto-industry crisis Wednesday with American officials.
Clement said Tuesday that there must be a resolution by May 31 – the deadline for GM to provide governments in Canada and the United States with a restructuring plan, which could include seeking bankruptcy protection.
Ottawa and the Ontario government are insisting on deep cost-cutting, beyond a GM-CAW deal in March, as a condition for $6 billion in financial assistance sought by GM Canada. Insolvent Chrysler Canada last month negotiated a labour-cost reduction estimated at $19 an hour per worker.
A major sticking point at General Motors is over pensions, on which GM Canada is estimated to have a deficit of $7 billion.
On the dealership issue, GM’s Low noted that dealers “have been very much aware of our need to rationalize the dealer body.”
In addition to the letters sent Wednesday, “subsequent to that we expect there will also be some consolidation that will naturally happen.”
GM has until May 31 to settle an agreement with the Canadian Auto Workers.
To see Political Specialist Richard Madan’s story on the ongoing talks between GM and the CAW, click on the video below:
