GM Canada is going through its own dealer closings too. As many as forty percent of all GM dealerships may be going away.
In advance of their expected bankruptcy filing later this week,
General Motors plans to close more than 1100 of its US dealerships. That number represents at least 25% of its American dealer network, but the automaker may close a much higher percentage of dealerships in Canada, where 40% may close their doors. Truly, GM is in for the fight of their lives, one that may cost ten thousand dealership jobs in Canada.
Canadian Closures Mirror US Market
The move to close so many Canadian car dealerships parallels what the GM is planning to do in the US: remove as many geographically close and unprofitable dealerships as possible in a bid to trim their retail outlets to compete much more effectively with those owned by Toyota, Honda and other top manufacturers. The Asian automakers typically build huge dealerships and place them far apart from each other in a bid to limit competition and price cutting. That move means that every Nissan, Mitsubishi and Subaru dealer sells at a higher volume as well as at a higher profit than what most GM dealerships can do.
With 709 dealerships in Canada, GM has plans to close 245 in October 2010, the same time when franchise agreements are due to be renewed. That number doesn't include scores of Saturn, Saab, Hummer and Pontiac dealerships which will also be axed, raising the percentage of GM closures above forty percent. Even then, depending how the automaker fares in bankruptcy, GM may close additional dealerships on top of the proposed numbers.
Largest Bankruptcy Declaration, Reorganization Ever?
The move to bankrupt General Motors is costing the US federal government tens of billions of dollars with that number expected to top one hundred billion eventually. Even then, the cost to restructure GM could push past $160 billion as the company holds special debtor in possession financing.
Just as I they did in the US, GM began to notify affected Canadian dealerships last week of their decision to terminate their business relationship with them. To that end, GM issued the following statement to its Canadian dealers:
“Due to the unique aspects of our Canadian dealer network, we have focused our network rationalization efforts on key urban markets in an effort to achieve a viable network configuration all across Canada. The end result in Canada will be a more competitive dealer network with higher volumes, while continuing to maintain the strongest and broadest dealer network in the country better equipped to serve GM customers.”
Returning To Viability
Of course, time will tell if GM can become viable once again to offer a product mix at prices and quality levels customers expect. Given the company's current struggles, that move won't come easy one that will have to be shouldered in part by its Canadian operation and business partners.
