GM Dealer network gets almost Total Makeover

Car dealerships are all about moving metal.

If that seems that old adage is a bit obvious, well, of it is. But in fact that hasn’t always been the case. For years, “moving metal” meant shuffling cars to dealers, regardless of whether said dealership could move it out the door with a happy customer. The inefficiency of the system arguably cost dealers money, sales and made customers cranky. And it certainly cost automakers money in the funneling of direct support to dealers. Just think about General Motors, and how their system of dealerships was really based on the “happy days” approach of the 1950s, not the less is more trend of today. Since then, the GM network slowly began to fall apart, with unprofitable dealers getting handouts directly from The General.

Lots of money going out. Not many sales going in.

That’s changing, however, and fast – as in now: Recent dealer network changes at GM are generally being hailed as a strong step in the right direction toward a lean dealer network based on sales volume and customer service performance. Here are just a few of the latest changes going on at GM:

1. GM’s new dealer count will be a lean 4,500 or so dealerships, down from over 6,000

2. There are only 14 brand combinations available, down from 87 last year.

3. GM now sells 4 brands, not 8, and stores are not allowed to “dual” or offer more than one brand, with anyone outside of GM.

Getting here from where GM and its dealers stood just a year ago was a struggle that many GM insiders have called one of the most difficult parts to the company’s restructuring. It’s easy to see why: Since last June, the automaker has shuttered four of its brands, offered wind down agreements to 2,064 Chevrolet, Buick, GMC and Cadillac dealers, and went through arbitration filings with over a thousand dealers. The reduction was based on what GM defined as an objective scoring across four categories, according to the proposal submitted to Congress:

Sales: Weighted at 50% measured against average for size of market

Customer Satisfaction: Weighted at 30% measured against regional average

Capitalization: Weighted at 10% measured against dealer’s needed working capital

Profitability: Net profits before taxes weighted at 10%

Dealers who scored under 70 across the four categories received a wind down agreement. And while it’s difficult to close dealerships – they are a significant employer, especially in small towns – most industry experts think it was a hard job well done, or at least done so that the revitalized company has a better chance of creating significant operational efficiencies. GM agrees, of course, with claims that the new structure will eliminate direct dealer support – think incentives paid directly to the dealer. Money saved from that area alone totals $2.1 billion. The General also claims that the new structure will keep them relevant in those aforementioned small town hubs, and will improve the customer experience. To that end, GM is also rolling out a significant brand remodeling for dealerships including new signs, comfy chairs, free Wifi and good (one hopes!) coffee.

After all, if it’s not about moving the metal, it’s got to be about drinking the coffee.

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