GM store rehabs: Cash with conditions
For remodeling money, dealers must follow rules
Dealers must follow GM's guidelines -- which require them to separate GM and non-GM brands, among other things. And the work should be finished in about three years. But GM will take five to 10 years to send the checks, which will be based on sales and not the cost of the upgrades.
GM has long prodded dealers to give its brands separate space. But post-bankruptcy, the automaker says, it is more determined to create enticing showrooms that encourage salespeople to sell GM's brands -- not competitors'.
The remodeling includes stores with new exterior entryways and reception desks and free Wi-Fi. The work should be complete in three years.Dealers receiving payments for what GM calls its Essential Brand Elements program also must adopt each brand's Web site look, agree to staff training and give GM their sales and service customer lists so the company can coordinate marketing mailings.
If dealers do everything that GM requires, "there's some fairly significant cash rewards that are intended to help offset the cost of the facility," says Kurt McNeil, Chevrolet's general sales manager.
Ed Peper, general sales manager of Cadillac, says GM will pay participating dealers based on their annual vehicle shipments. To determine the total amount, the company will use a seasonally adjusted formula that takes into account the price of the vehicles sold.
McNeil says the cash, which would come over five to 10 years, could "conceivably" cover the recommended changes. Of course, if a dealer decides the recommended construction provides a good opportunity to replace the roof or air-conditioning unit, those extra costs are the dealer's responsibility.
GMAC Financial Services also has said it wants to help finance construction, McNeil says.
GM and the San Francisco architectural firm Gensler will assess each dealership's needs.
Dealers will be asked to give competitive brands distinct space separate from GM brands by October. And GM will ask some dealers with a particularly high-selling GM brand to move that brand to its own building. If they comply, they'll get the cash. If not, they won't.
The automaker's quest for GM-specific showrooms is occasionally thwarted by independent-minded dealers, McNeil says. Sometimes, he says, "we show up and they've got a different franchise in the showroom."
About 100 of the 3,100 ongoing Chevrolet dealers currently include competitors' brands in their showrooms, McNeil says. Buick-GMC and Cadillac did not provide numbers.
Peper says Cadillac will have a long talk, at least, with any dealers who don't remove competitors' brands from their showrooms. GM hasn't decided what to do about dealers who don't comply.
Peper says Cadillac doesn't expect to face much opposition to the remodeling from its approximately 500 ongoing dealers, and he doesn't expect any remodeling holdouts to be terminated.
"We took a long time in selecting the dealers who we want to play in the game," Peper says.
McNeil says updating the stores will help GM battle its stodgy image, especially with younger buyers.
"If they have all these great experiences and interactions on the Internet, and then they walk into the dealership and it's the same old experience -- we need to connect those two," he says.
Dealer Tim White, whose family owns five GM brand stores in three states, says he views the dealership remodeling campaign as asking a dealer to make a huge commitment with no guarantees.
"Everyone should have a nice facility," White says. "But, goodness gracious, give us a chance to figure out what the market's going to look like."
McNeil says GM understands the economic uncertainty, but "it's really one of those situations where we've got to get started."