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GM Prefers Settling With Targeted Dealers Out of Arbitration

The auto maker will sit down with every one of the 1,160 dealers applying for arbitration, and it is looking at ways of increasing production on key models that “may not be traditional,” a top executive says.

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ORLANDO, FL – General Motors Co. says it wants to avoid arbitration with dealers appealing wind-down notifications by the auto maker this year and instead reach either a mutually agreeable settlement or reinstatement.

“It would be wonderful if we did not have to arbitrate and we took every single dealer and had that conversation with what they want to do, what is best for the business,” says Mark Reuss, president of GM North America.

The U.S. government gave GM until mid-June to either reach a financial settlement with dealers swept up in the auto maker’s retail consolidation plan or reinstate those franchises.

If those paths fail, GM and the dealer would enter a legal arbitration process in which a third-party would decided the outcome. Reuss says the auto maker will sit down with every one of the 1,160 dealers to file for arbitration consideration.

“If someone needs to arbitrate, we’ll arbitrate for the process,” Reuss tells journalists during a roundtable discussion here linked to the annual National Automobile Dealers Assn. meeting. “But it would be preferable if we did not enter into a legal activity from both parties standpoint, I would think.”

Either way, Reuss says GM plans to sit down with every dealer who has appealed and examine the situation individually.

“We’re not going to over-policy this so it fits into a nice box of policy that says we want this type of a network (or) it’s going to be based on this,” adds Reuss, who admits fixing the auto maker’s dealer-consolidation plan has taken most of his time since taking his new position some two months ago.

“We don’t have to do that. (We’ll) treat it like a customer that is going to buy a car.”

GM said in a viability plan to Congress ahead of its bankruptcy last year it planned to reduce its entire dealer body by some 1,546 stores to 4,700 locations from 6,246 at the close of 2008. However, since Congress stepped in earlier this year, it is less clear how many dealerships might close.

GM says fewer dealers will mean more throughput for those who remain, which will boost their profitability and allow them to invest more into refurbishing their stores to compete better against newer facilities selling Toyota Motor Corp. products.

Reuss, who was joined at the roundtable by Susan Docherty, vice president-sales, service and marketing, also quashes rumors he had not planned to attend NADA this year. GM will not meet with dealers here in a traditional format, choosing instead smaller meetings at a nearby hotel.

“I’m here,” he says, “and I was always going to be here. We always will be here as long as I’m around and as long as Susan is around.”

Reuss does not expand further on GM’s manufacturing plan, reiterating only that the auto maker remains short on some key products and is working on creative ways to crank out more of them.

“I’m not ready to say which plants, because we’re still looking at which ones and how to do it,” he says. “That is not a conversation that would be internal to GM but also to some of the states where those plants are.

“What we want to do is something that may not be traditional in terms of how we do it and how we staff it and how we bring it on and off,” Reuss says. “It could be very innovative, and it could be an opportunity for everybody who it touches.”

To meet demand, however, Reuss says GM would not necessarily have to open an assembly plant, suggesting it could ramp up more stamping and powertrain operations instead.

GM finished January with a stock of 387,359 cars and trucks, according to Ward’s data, and Docherty said during last month’s sales conference call GM would like between 400,000 and 450,000 units of inventory.

Shortages are not on just popular launch products such as the Chevy Equinox, GMC Terrain and Buick LaCrosse, but even large SUVs such as the Chevy Tahoe and GMC Yukon.

But the additional product won’t come over night, Reuss tells Ward’s, specifically citing new shifts at Delta Twp., MI, and Fairfax, KS.

“We don’t have all those third shifts fully online yet, we’ve just announced those,” he says.

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