Although General Motors has widened and accelerated the campaign to cut its dealer network, the automaker must treat dealers fairly while terminating them.
For some time, GM has said it wants fewer dealerships. But last week's announcement that it wants just 3,605 stores by the end of 2010 was a surprise.
According to the Automotive News dealership census, on Jan. 1, 2009, GM had 6,273 U.S. dealerships, excluding Saab.
GM plans to notify dealers at up to 1,200 poorly performing stores that their franchises will not be renewed. The factory expects to buy back unsold new vehicles, parts and tools but pay nothing else for the franchises.
About 500 dealerships are expected to close through normal attrition, and 500 more will come off the books when GM divests or folds the Hummer, Saab and Saturn brands. Killing Pontiac will remove 35 stand-alone stores.
That leaves about 500 healthy dealerships for which GM must compensate dealers, fairly and promptly, for the blue sky the dealers will say they are being forced to forfeit. GM ought to treat each termination case by case, even for poor performers.
There is a downside that GM execs must address better than they did when Oldsmobile was phased out.
-- There likely will be lawsuits from dealers with stores in each of the categories, no matter how fairly factory execs think they are treating dealers. That could mean paying more compensation than originally planned.
-- Eliminating brands and dealerships will mean lost retail business because some consumers won't switch to other GM dealerships or brands. GM must steer as much of that business as possible to its other stores.
-- GM also must not erode what little diversity it has been able to achieve in the dealer network. It took decades for GM to recruit 230 minority dealers. Their stores should be preserved.
Most of all, GM must remember that dealerships are not a cost item. Dealerships are the factory's customers. Dealerships generate revenue for the factory. Dealerships keep retail customers satisfied.
In good times, factory executives liked to refer to their dealers as partners. In these brutally tough times, GM execs ought to prove they meant it by treating every dealer like a partner -- even those being terminated.