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GM's Combo Order

Nearly 500 stand-alone Buick, Pontiac and GMC dealers face an ultimatum: combine or face the consequences. The consequences are unpleasant. Fewer body styles and models will be coming from General Motors Corp. for those stand-alone dealers in GM's national network who fail to reach combination agreements. As of this year, 198 of the stores handle Buick soley; 110 are Pontiac stand-alones; and 168

Nearly 500 stand-alone Buick, Pontiac and GMC dealers face an ultimatum: combine or face the consequences.

The consequences are unpleasant. Fewer body styles and models will be coming from General Motors Corp. for those stand-alone dealers in GM's national network who fail to reach combination agreements.

As of this year, 198 of the stores handle Buick soley; 110 are Pontiac stand-alones; and 168 are GMC only. GM has not spelled out how these stores will be encouraged to join forces to create the proposed Buick-Pontiac-GMC bundle of dealerships, leaving single-brand, full-line selling duties to Chevrolet and Cadillac dealers.

All that Mark LaNeve, GM North America vice president-sales, service and marketing, has said is that product lineups will be shrunk for each of the three targeted brands.

Dealers' business opportunities for each of the three lie in combining and adding numbers to the 784 Buick-Pontiac-GMC dealers already in operation. The net effect will be fewer dealerships.

The combo order is designed to assure the future of Buick and Pontiac, says LaNeve. They are the ones whose overlapping models will be pared. Four GM brands offer minivans: Buick, Chevrolet, Pontiac and Saturn. One or two of these minivan nameplates are endangered.

Although LaNeve insists GM won't coerce dealers into combination arrangements, the concept of pared vehicle segment offerings if one fails to merge smacks of an ethical challenge to some dealers.

“If GM is adopting a strategy of survival of the fittest, I don't know if that helps dealer morale,” says Conrad Darby, owner of Darby Buick in Sarasota, FL.

What's more, most state franchise laws have anti-coercion clauses that forbid auto companies from terminating franchises without cause or from otherwise intimidating dealers.

A Pontiac stand-alone dealer in the Southeast, requesting anonymity, says he's convinced GM would be obligated to recompense dealers asked to sell their “only source of revenue” to another GM dealer under threat of losing models for non-compliance.

“They paid off handsomely for Oldsmobile dealers,” he says. “How is making me sell out to a Buick store any different?”

In response to concerns of potential heavy-handedness, GM notes it helped rearrange Buick and Pontiac franchises in the Detroit suburb of Farmington Hills, MI.

There, veteran Buick dealer Bob Saks agreed to sell his franchise to Bob Sellers Pontiac-GMC. In return, Saks acquired an open point for a Buick-Pontiac-GMC store in South Lyon, MI.

“GM gave us the opportunity in South Lyon, as well as aided in building a new dealership,” Saks says. “If not for that, the deal would not have occurred.”

The Sellers-Saks deal was not overly complicated. But most stand-alone Buick, Pontiac and GMC stores are in metro markets that are considered to be “over-dealered,” and where no nearby open points exist.

Buick dealer John Rogin likes GM's plan to expedite more Buick, Pontiac and GMC combos, while leaving Chevrolet and Cadillac solo stores untouched for the most part (as well as “niche” brands Hummer, Saab and Saturn).

“This could be a great opportunity to add the other franchises that are available,” says Rogin of John Rogin Buick-Livonia (MI). “There's no Pontiac or GMC point in Livonia and, with Buick alone, we'll be losing minivan and probably SUV models the others have.”

In smaller markets, where up to all GM brands may be offered from single locations, little impact of the LaNeve game plan likely will be felt.

There are 245 Pontiac-GMC stores not dualed with another GM brand, many in midsize or smaller markets. Most of these are candidates for a Buick add-on, which could be obtained from retirement of a veteran Buick dealer or detachment of the Buick franchise from a Chevrolet or Cadillac facility.

“Strong brands win; weak brands lose,” LaNeve tells the International Motor Press Assn. in New York City.

He adds that successful auto makers are anchored by a great volume brand at one end and a great premium brand at the other. “In our case, that's Chevrolet and Cadillac.”

Paul Rubin, co-chairman of GM's National Dealer Council and a Pontiac-GMC dealer in White Bear Lake, MN, says LaNeve's bundled-brand strategy shouldn't surprise stand-alone Buick, Pontiac and GMC dealers.

For the past five years, since Oldsmobile was sentenced to termination, it has been no secret that the other three older brands eventually would have a problem, according to Rubin.

“Now GM is telling them they will really have a problem because they won't have a product,” he says.

Many dealers interviewed by Ward's consider GMC to be the “wild card” in the proposed splicing of GM brands. There are 2,238 GMC franchises compared with 4,132 Chevrolet stores — each selling similar pickup truck and SUV products.

A GM spokesperson says a Pontiac-Buick hookup is unlikely without GMC “thrown in” to add a store-strengthening truck line. For GM, frosting on the cake is if a Buick dealer adds Pontiac or a Pontiac store gets Buick selling rights.

“There's strength in numbers,” LaNeve says. “Three brands are more profitable than two or one.”

Existing Buick-Pontiac-GMC Dealers Wait and Watch

The 784 existing Buick-Pontiac-GMC dealers are watching as GM seeks to add more stores incorporating the three brands, while eliminating dealerships representing only one or two of those nameplates.

“We're ringed now by four Buick-Pontiac-GMC stores,” says David Koss, general manager of Larry Koss Pontiac-GMC-Buick of Richmond, MI, north of Detroit.

He adds: “Another new Buick-Pontiac-GMC store is being built by Joe Serra in Romeo, MI, and the largest Pontiac store in southeastern Michigan, Jim Causley Pontiac-GMC, is relocating closer to us with a Buick addition.

“We figure our territory is formed by an 8-mile ring around Richmond, but too many dealerships with the same brands just a few miles beyond our territory could create quite a problem.”

Koss and dad Larry have been in business in the area for 12 years. Two brothers and a sister work there too.

“Our customer satisfaction rating is excellent, and we are extremely satisfied with the new Buick, Pontiac and GMC products,” Koss says. “We're loyal to GMAC (General Motors Acceptance Corp.) and look forward to a long relationship with GM.”

He is cautiously optimistic all will work out for the beleaguered auto maker. “But being over-dealered could prove a problem when you're in a small town,” says Koss. Richmond and the surrounding area have a population of close to 10,000 people.

Across the sprawling metro-Detroit market, a state-of-the-art showroom and service department in Ypsilanti, MI, sets the tone GM would like to repeat for Buick-Pontiac-GMC dealers.

It is the flagship of Prestige Automotive Group whose president and CEO, Gregory Jackson, disavows any concern about what GM will do in nearby Ann Arbor to the west, where there is a solo Buick store — or in Dearborn to the east, which has Buick-GMC and Pontiac dealerships.

“What will be, will be,” says Jackson, whose dealership group owns Chevrolet and Pontiac stores in out-state Michigan markets, plus three Saturn dealerships in Jacksonville, FL.

“I'm not concerned about the combining of franchises, because the key to success in this business is product,” he says. “What GM has ahead in Pontiac, Buick and GMC products will be what brings buyers to this dealership.”

Jackson's strategy in building a network from the Buick-Pontiac-GMC base enabled the Prestige group to top $1 billion in total sales in 2004.

“As a minority dealer and with GM Dealer Development Support, I strongly believe in growing with more dealerships,” Jackson tells Ward's. “We just bought our first Ford store, in Lansing, MI, and have been awarded an open Mercedes-Benz point.”

Having a number of dealerships spurs employees to increase their performance in the hope of being promoted to jobs within Prestige, says Jackson. “That's what we owe to our Pontiac-Buick-GMC store as the foundation.”

Cadillac dealers surveyed by Ward's are not as concerned about another combination proposed by Mark LaNeve, GM's North America sales and marketing chief.

Consolidating Cadillac, Saab and Hummer brands into one luxury dealership grouping is not on the front burner like it is for Buick, Pontiac and GMC, according to a Cadillac dealer asking for anonymity.

Only about 30 of Saab's 250 dealerships and 100 of Hummer's new 169 stores are dualed with Cadillac now. “GM is not pursuing Saab dealers for sellouts with the intensity they are pressing Buick and Pontiac stand-alones,” this dealer notes.
By Mac Gordon

TAGS: Dealers Retail
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