General Motors is taking its San Fernando Valley project to other metropolitan markets.
GM will form partnerships with existing dealers in some markets where its share is struggling. It will use the partnerships to buy ailing dealerships and consolidate them.
That's the model the automaker used in Los Angeles' San Fernando Valley. There it bought nine dealerships, consolidated them into five and brought in successful dealer Wes Rydell from the Midwest as its partner.
GM would not say how many markets it is targeting or which ones it is considering.
In the San Fernando project, GM has kicked in $18 million, while Rydell and other partners contributed $2 million.
Dealers in the Los Angeles area initially fought against the San Fernando Valley project, saying it was too large and too close to factory ownership. But state officials so far have recognized the project as a traditional dealer-development program, legal under California franchise laws.
Outgoing NADA Chairman Jim Willingham now says the San Fernando Valley project and others like it are fine as long as the dealer can buy out GM in a reasonable period of time - say, five to 10 years. Willingham also wants GM to get dealer input before starting such projects.
'It's much better than them going in and buying the stores themselves and running them with managers,' Willingham said, referring to GM's now-defunct GM Retail Holdings business unit. GM created the unit to own and operate up to 770 GM dealerships.
Under the new San Fernando-like projects, 'We would only buy if we have a dealer to go in with us. The intent would always be for the dealer to buy us out as soon and fast as possible,' said Roy Roberts, group vice president of North American vehicle sales, service and marketing.
Roberts said GM would concentrate on areas 'where we need to restructure because the market share is so dismal.'
NADA leaders said they believe GM is sincere when it says it will allow its dealer partners to buy it out.
'If they don't, they've broken their promise, and we're back to square one,' said Lou Kairys, a GM dealer with stores in Washington, D.C., and Virginia, and chairman of NADA's industry relations committee.