Car Trouble

As GM Canada spokesperson Jennifer Wright explains, a surplus of dealerships isn’t the ideal means to that end. For one thing, to secure loans amounting to $50 billion from the United States government and $10.5 billion from Canada and Ontario, the company had to prove it could operate leaner than in 2008, when structural costs ran more than $30 billion. And even if those shops were independently owned and operated, “dealers that aren’t as profitable basically aren’t helping the bottom line of our company,” says Wright. GM may not have carried the costs of the buildings, land, employee salaries and so on, but it did support dealer liaison staff, information technology, stationery and some marketing costs.

“As GM is moving into restructuring,” she adds, “we needed to make some difficult decisions quite quickly for the health of the company. And we do believe that after this is complete, we will have a very strong dealer network.”

Michael Hatch, chief economist for the Canadian Automobile Dealers Association (CADA), isn’t convinced of the cost savings associated with cuts. Nor does he think the severance offered to dealers – which Wright declined to describe but which Hatch understands to be calculated on the basis of a dealership’s sales record – will cover closing costs. Dealers that sign the agreement GM sent out in May will sell remaining stock until fall 2010, but “the cars are going to be the least of their problems,” says Hatch.

“That’s a pretty liquid asset. What is going to be a real problem is things like real estate, which is not so easily convertible into cash. These are buildings that are tailor-made to be car dealerships.” As well, the question remains as to whether GM’s offer will help big-city dealers compensate dozens of employees.

Still, Hatch can’t deny the necessity of the decision. “It’s as good a deal as can be expected,” he says. Reporting a worldwide market share of 12% in July, “GM is left with a smaller piece of a smaller pie,” says Hatch. “They’re not in the same position they were 10 or 20 years ago.”

Naturally, the necessity of the closures isn’t something Dave Weidner is comfortable discussing. For one thing, he counts old friends amongst dealers closing their doors. For another, he doesn’t want to bite the hand that has chosen to continue feeding him. So he proceeds as cautiously as possible: “There had to be something done, and I guess that’s what they had to do and they went ahead,” he says. “I thought it was handled in a funny way but I guess it was handled politely.”

Dave Paradee, owner of what used to be Paradee Pontiac Buick GMC in Taber, is one of those old friends. He and Weidner grew up together in Blackie, a village about 70 kilometres southeast of Calgary before it unincorporated in 1997. Paradee’s dad ran the Chevy dealership while Lou Weidner sold Chrysler. Now Paradee, who has been selling cars for 31 years, is one of the few affected GM dealers willing to talk about the restructuring. Many fear jeopardizing already uncertain futures.

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