DETROIT — Even with bankruptcy looming as a possibility at the end of the month, General Motors could face a barrage of lawsuits as it tries to meet the U.S. government's demand to streamline its dealership roster.
Starting this month, GM will meet with or send a letter to 1,000 to 1,200 dealerships to inform them that "they will not be part of a reinvented GM," said Mark LaNeve, vice president of vehicle sales, service and marketing.
GM says it will not renew franchise agreements next year of the dealerships that fail to make the cut. GM says it will repurchase unsold new vehicles and parts from dealerships that voluntarily close, but won't compensate for the loss of the franchise.
GM says about one in six dealerships will be identified as poor performers. The poor performers are separate from dealerships of Saturn, Saab and Hummer, which GM plans to shed. But absent Chapter 11 bankruptcy protection, lawyers say, GM can't fire dealers for less than good cause.
Says dealer lawyer Eric Chase, with Bressler, Amery & Ross in Florham Park, N.J.: "If GM tries to end its relationships with all these dealers, or many of them, involuntarily, its legal and factual burdens will predictably be extremely difficult.
"Remember, under state laws, there's not a whit of difference in what GM would have to show in a nonrenewal versus an involuntary termination."
The wild card: If the government, as the lender of last resort, forces GM to follow Chrysler LLC into Chapter 11, bankruptcy law could supersede the many state franchise laws that protect dealers.