For Oldsmobile dealers the clock is ticking. Sometime in 2004 — General Motors Corp. has yet to set a final execution date — the 105-year-old Oldsmobile brand will end.
Since nearly two years ago, when GM announced the impending demise of the division, some Oldsmobile dealers have struggled with accepting a monetary settlement that they say doesn't come close to covering the emotional ordeal of closing down businesses that sometimes took lifetimes to build.
As of Oct. 1 however, 1,911 Oldsmobile dealers have accepted the inevitable and signed buy-out agreements. Of those, 680 have closed down operations. It hasn't been easy. Nor is it over.
“We are making progress, but we're not declaring victory,” Darwin Clark, GM's general manager of North American field sales, service and parts tells Ward's.
It could ultimately cost GM $2 billion to end the Olds dealership network.
Rowan Pontiac GMC, in Southgate, MI closed its Oldsmobile store on July 19. “We were losing our ass,” says Mark Montante, the store's general manager. “GM couldn't guarantee they could give us more product. As it was, we only had to sell back eight vehicles.”
The dealership also sold its Cadillac franchise in 2001 because it was unsure of its viability without the Oldsmobile brand to complement it.
GM is in settlement discussions with 782 dealers. That leaves 108 dealers who are holding tough — several of whom are suing GM. Several have refused comment because of the ongoing litigation.
“There is a different issue with each dealer,” says Clark. “And that is the toughest part of the process.” Some dealers are in denial, he says. One dealer told him he refuses to sign off because he believes GM will reverse its decision and keep Oldsmobile.
George Glassman, owner of Glassman Oldsmobile in Southfield, MI, scoffs at the notion that the auto maker might do that.
“I've heard that from some other dealers and I'd like to know what they're smoking,” he says.
Despite realizing Oldsmobile is doomed, Glassman says he's not going to settle for the cash settlement because he's looking to obtain another GM franchise.
“It's important for GM to keep me in the family and I'm relying on them for an amicable solution,” he says.
Glassman is one of those 6% of Oldsmobile dealers not dualed with another GM franchise. Those dealers may have a tough time finding other GM brands. GM is not providing other franchises to dealers as part of the settlement. So those dealers have to go through the same process as any other dealer desiring a GM franchise. (See story on page 22.)
GM spokeswoman Marcia McGee says it's tough to track which Olds dealers have obtained other GM franchises since the December of 2000 death sentence because there are as many as 200 franchises in the process of changing hands at any one time.
Glassman admits to bitterness. But he says the ordeal has gone from being “incredibly tough and emotionally draining to now having renewed energy.”
Choosing his words carefully, he adds, “Regardless of the venue, the situation will work out for the best for me.”
Meanwhile, other dealers haven't signed because they're hoping GM will enhance the formula it's using to determine the settlement. That won't happen, says Clark.
“The template we came up with is going to stay the same. We need to treat all of the dealers with the same rules. If we changed the template now, we'd have to go back and change it for all of those dealers who have already signed the settlement,” he explains.
The buy-out plan GM established is a transition financial assistance package that consists of a graduating scale of five categories that determines the monetary settlement for each dealer.
The payoff formula is based on new unit sales volume for a dealer's best year from 1998 to 2000. Those single point dealers and dual dealers whose Oldsmobile sales make up a larger percentage of their total volume receive more money.
For example, a single-point Olds dealer would receive $2,400 per vehicle sold in the best year while a multi-franchise dealer with Olds sales of 10% or less would receive $1,500 per vehicle. An additional facilities assistance sum of $400 per unit is calculated based on best sales year.
Speculation has been that only the smaller dealers are willingly signing the agreement but according to Clark, the percentage of dealers who have signed is fairly consistent, regardless of the size of their stores.
Alan Starling, who becomes chairman of the National Automobile Dealers Association in 2003, signed the settlement in late spring.
“It has been a painful process,” says the owner of Holiday Chevrolet and Oldsmobile in St. Cloud, FL. “There were a lot more emotions involved than what people realized, and that's a shame.”
He spent much time and effort in the 1990s flying to Detroit to help GM develop a new vision for the struggling old brand, he says. He admits to feeling unsettled for months after signing the termination agreement.
“I wasn't sleeping well and I had a tough time looking at myself in the mirror while shaving,” he says.
Starling wants to keep his Olds franchise as long as possible but “it's getting harder and harder,” he says. His monthly sales are down over 50% to eight or nine units a month now. “A lot of the Oldsmobile sales must be getting pushed through the rental channels,” he says.
Oldsmobile sales through September are down 35% from the same time last year. “Sales are anemic,” says Glassman.
A big concern for GM is retaining the Oldsmobile customers in the GM family. Results have been so-so up to now. Approximately 62% have stayed with GM since the announcement, according to the auto maker. That means nearly 40% have gone elsewhere to buy vehicles.
In January 2001, GM mailed vouchers worth $1,500 toward the purchase of a new Oldsmobile or $1,000 for another GM brand. Those vouchers went to every Olds owner going back to the '96 model year. But only 21% of those coupons have been redeemed, says GM.
One question is which dealerships gets access to those customers as the Oldsmobile stores close.
The first rule, says Clark, is that “the customer should not be inconvenienced at all.” Access, as a result, is based on location — whichever GM dealership that Oldsmobile customer is closest to will have the right to market to that customer.
For service-related issues, Oldsmobile customers are being directed to the closest Oldsmobile store, or to the closest GM store if there is not an Olds store in the area.
Rowan hasn't lost any customers, though, according to Montante. “Many of our Olds customers migrated to our Pontiac GMC store. In fact, our Pontiac sales are up 40% from last year.”
2,801: Number of Oldsmobile dealers when GM announced it was killing the brand
1,911: Dealers who've signed buy-out agreements
680: Dealers who've already closed down operations
246: Settlements nearly signed
536: Active discussions ongoing
108: Defiant dealers not involved in any discussions to sign an agreement