General Motors softened its demands on its surviving dealers last week.
The dealers, for example, won the right to meet with a GM representative next year to discuss sales objectives. And the company promises to negotiate reasonable sales improvement goals.
GM is walking a tightrope as it tries to work out of U.S. Bankruptcy Court. To shed thousands of dealerships, it is using tough tactics that are angering many dealers. But GM needs dedicated and enthusiastic dealers to boost sales and work out of its deep financial hole.
"They know they have to be flexible," says Dave Grundstrom, president of Marvin K. Brown Auto Center in San Diego, which sells Cadillac, Saab, Hummer, Buick and GMC. He got the original participation agreement that GM wants surviving dealers to sign.
"The original agreement was really harsh," Grundstrom says. "This did a lot to clarify things and soften it up."
GM asked the survivors to sign stringent participation agreements by Friday, June 12. They require dealers to significantly increase per-store sales, improve their stores, take more inventory and limit their right to protest GM's placing a store near them.
Last week, GM CEO Fritz Henderson testified that nearly all the GM dealerships that received the participation agreement have signed or agreed to sign. About 96 percent of the 1,380 GM dealerships slated for termination have signed wind-down agreements.
GM wants about 3,600 dealerships by the end of 2010, down from about 6,000 today.