Re:How car dealers tie Detroit's hands
by jbarciauskas on Friday November 21, 2008 @01:34PM
(#372172)
Isn't this exactly what bankruptcy is for? Put GM in a pre-packaged bankruptcy (http://www.investopedia.com/terms/p/prepackagedbankruptcy.as...), and one of the planned actions should be shedding these unprofitable brands and severing the relationship with these dealers. The dealers made a bad bet on a brand, they are entitled to nothing.
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> severing the relationship with these dealers.
That's actually hard to do - there's a myriad of state and federal laws that make this all but impossible. It cost about a billion dollars for GM to deep six the oldsmobile brand, buying out old dealers franchises, etc...
Presumably it would be easier (and cheaper) to kill a brand while bankrupt than while trying to stay solvent. Dealers might be more amenable to changing brands or state laws if the alternative is to go out of business entirely.
IANAL, but can't they just stop renewing the franchise contracts? It would take a few years, but eventually they would be off the hook at ~zero cost.
Another option might be to simply stop updating the models of a given brand. Dealers survive for a few years servicing the currently existing models until they eventually switch to other brands.
"IANAL, but can't they just stop renewing the franchise contracts?" - which will cause the dealers to revolt. And as the article says, collectively they have the states in their pockets.
There's no way for GM to strip the dealers of their franchises without the dealers fighting back. Without the big stick of Chapter 11, GM doesn't stand a chance.