GM Sends Incentive Offer to Customers of Terminated Dealers

And those dealers go a little crazy…

By Brendan Moore

11.23.2009

GM logo smallIn a move that has made some dealers howl with anger, General Motors has sent out direct mail pieces to customers of terminated dealers that offer discount certificates of as much as $2000 USD on a new GM vehicle.

The letters were sent to almost a million retail customers and are valid for a 45-day period.

The dealers in question have either already shut down or will cease franchise operations by October, 2010. However, many of these dealers are also involved in the active struggle to convince Congress to force GM to reinstate their terminated dealerships, and view GM’s actions as acting in bad faith. Dealers point to GM’s action as proof that GM has no intention of restoring any of their dealership franchises and considers the outcome of the reinstatement negotiations going on between GM and the dealers, and GM and Congress, as a foregone conclusion – that is, that the decision will be in GM’s favor.

Legislation introduced to restore both GM and Chrysler dealers to pre-bankruptcy status passed the House sometime ago, but is so far going nowhere in the Senate.

The terminated dealers feel that GM is pushing their customers to surviving GM dealers, so that, even if the terminated dealers were to prevail in their fight to regain their franchise, their customers will then be some other GM dealer’s customer.

GM, of course, doesn’t see it that way.

GM says they must move quickly to retain their customers and that they are obligated to try and do that with early and aggressive marketing now. Their point of view is that these now-unmoored customers of the terminated dealerships are up for grabs by any automaker and GM intends to do its level best to keep these customers in the GM fold.

According to the November 16 statement GM filed with the federal government, 1,839 dealers have agreed to cease operations by October 2010.

It is anyone’s guess at this point as to which way the reinstatement struggle will go, but many dealers are optimistic that they will win that battle, and these dealers in particular are reacting with fury over GM’s marketing efforts. They view the customers that GM is soliciting as their customers, not GM’s, and therefore consider the direct mail incentive offer a brazen attempt by GM to make sure the dealerships in question go out of business one way or another.

Industry analysts agree that GM doesn’t have much choice in this matter. If GM doesn’t go after these customers hard, they could just drift away to other brands bit by bit. History confirms this – former Oldsmobile customers did exactly that after their brand went away earlier this decade.

COPYRIGHT Autosavant – All Rights Reserved

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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8 Comments

  1. worrying myself sick over those poor car dealers.

    not

  2. Beat-Nick,
    Yeah, I probably won’t be able to sleep tonight either. 🙂
    Brenda,
    Nice reporting. I like hearing what’s going on in the business side of the automotive world.

  3. I think he’s a guy.

    Brendan.

    But, yeah, interesting to hear about what GM is doing on the business side. The dealers believe that they are GM’s customers and that the people who buy cars are the dealer’s customers. Too bad GM can’t have factory stores.

  4. The mind boggles at the audacity of an auto dealer claiming that he is being cheated.

  5. News flash for dealers: I care about my Chevrolet, not your dealership. I’m Chevrolet’s customer, not yours. You are simply a means to an end.

    I don’t like the dealer I bought my car from and I don’t like the dealer where I get it serviced for warranty work. As soon as my warranty is up, I will get service at my favorite shop, where I do have quite a bit of loyalty.

  6. Good for GM. They need to do something to keep their customers, so why not this?

    GM shouldn’t let a bunch of has-been dealers determine their strategy.

  7. Whether you like car dealers or not (and who does), they are businesses that deserve fair consideration under the legal agreements in effect when GM went BK.

    The legal question here is whether GM’ bankruptcy voided the protection these dealers had under their state franchise laws.

  8. Car dealers suck. I hate car dealers more than I hate lawyers.

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