General Motors and Chrysler faced massive backlash when they followed through with a major national effort to reduce the size of their dealer networks in search of higher individual dealer profitability, but now it seems The General is well on its way to achieving the end-goal it envisioned as it emerged from bankruptcy.
While GM is reporting that dealers operating profitably have already increased 15 percent to 92.8 percent since 2009 when it began shrinking its dealer network, Automotive News says the automaker is continuing its onslaught of change by enlisting some 96 percent of its entire network in a special program that provides dealers with kickbacks in exchange for upgrades to dealer facilities.
GM reported that it currently has 460 dealers scheduled to complete refurbishment by the end of 2011, with some 4,000+ dealers set to undergo some form of refurbishment between now and the end of 2014. This is being driven by Essential Brand Elements, the GM program that pays quarterly bonuses to dealers who choose to reinvest in store improvements.
While the program is highly attractive to dealers in a position to take advantage of the offer, the minority group of dealers not currently profitable, as well as smaller dealers who are profitable but lack sufficient funding cannot obtain the necessary loans to take advantage of the program.
As a result, smaller and less profitable dealers face the challenge of becoming even less competitive in coming years.
