GM cutbacks leave dealers scrambling

Frank Videon got his start in the car racket at 11, pulling weeds at his father's Delaware County dealership.

Today, 53 years on, word came that his time in the business may be up.

Videon owns a Chevrolet dealership that bears his name in Newtown Square. He was among about 1,100 General Motors dealers nationwide notified by the company that their leases would not be renewed.

Notifications came a day after Chrysler, which is in bankruptcy, announced it was cutting ties with 789 of its 3,200 dealers, including 11 in the Philadelphia region.

The moves by both automakers are designed to bolster performance by reducing the number of competing dealerships.

GM is seeking to reduce the number of its dealers from about 6,200 to roughly 3,600 by the end of 2010. The remaining cuts will come from closed Saturn and Hummer dealers, along with 400 dealers that the company expects will close voluntarily. An additional 500 would be consolidated into other dealerships.

GM is doing so as part of a restructuring aimed at saving the automaker. It has received $15.4 billion in aid from the federal government and faces a June 1 government-imposed deadline to dramatically reduce costs or file for bankruptcy. Chief executive officer Fritz Henderson said today that bankruptcy was "probable."

"We will be talking to all of our dealers over the next few weeks, letting them know now in the spirit of open communication, so they are advised well in advance, about our long-term plans and their role in them," Mark LaNeve, GM vice president of sales, service and marketing, said in a statement. "Long-term, GM should have fewer, healthier dealers, maintaining GM's current high customer satisfaction ratings, with more sales per outlet."

Unlike Chrysler, GM did not release a list of the dealers that were to lose their franchises, so it was difficult to determine how many local dealers were affected.

The difference in approaches was dictated by the Chrysler bankruptcy, which required that it seek court approval if it is to cancel existing contracts with dealers. In seeking approval, it filed in court a list of the affected dealers.

GM is not seeking to cancel existing contracts but simply not renew them after they expire. The company said it would let individual dealers decide if they wanted to make public their contract status.

Under those contracts, GM must buy back unsold cars from the dealers losing franchises. Chrysler dealers will not have the same protection if existing contracts are canceled in bankruptcy court. The same fate could befall GM dealers should that carmaker file for bankruptcy and seek to sever franchise contracts immediately.

Videon, contacted by phone, freely acknowledged he had been notified that his contract was not to be renewed when it expires next year.

His dealership has been in operations "24 years and nine months," he said.

What now?

"Good question. Maybe I'll become a newspaper guy," he said, turning the tables a bit on his inquisitor. "I've been very fortunate. My kids are grown, college is done, weddings are done. I worry about my employees, though."

He has 35. "At least 19 have been with me over 20 years," he said. "That's big time. I hope I can place them. They are all great people, super."

Perhaps he could sell another brand of cars?

"I don't see the opportunity," he said. "There are all kinds of franchise laws you have to get passed, and it's kind of crazy. There are always used cars, but I don't know if I want to do that."

And the rest of today?

"They gave us until October 2010, so I'm going back to work," he said. "What can I say? It's been a blast, but that's the way it goes."