In the next seven days, General Motors Corp. and Chrysler will tell as many as 2,000 dealers they are no longer wanted. They won't go without a fight.
GM, which posted a $6-billion quarterly loss Thursday, plans to notify 1,000 to 1,500 dealers early next week that it will not renew their franchises, according to company officials. That group -- which does not include dealers of brands slated for elimination or sale -- represents the largest share of the 2,600 dealers GM told the Obama administration it would eliminate by the end of 2010.
Separately, Chrysler, which filed for bankruptcy protection in New York last week, is expected to notify roughly 800 of its 3,200 dealers as soon as today that it will tear up their contracts, potentially reducing its nationwide dealership count by a quarter.
The two imperiled automakers, which have borrowed $20 billion from taxpayers, say cuts are needed to reduce costs and return to viability.
But it amounts to a blood bath for dealers, who employ hundreds of thousands of people nationwide and pump billions of dollars into their area economies. With dealers unsure whether their names will be called, a pervasive sense of dread has crept into showrooms.
"This is going to be the biggest week in the history of the U.S. auto industry as far as dealers are concerned," said Scott Silverman, an attorney at law firm McCarter & English who specializes in dealer contract law.
In anticipation of the cuts, the National Automobile Dealers Assn. is taking out advertisements in major publications urging President Obama "to choose Main Street over Wall Street." It will meet with the administration's auto task force Thursday.
Meanwhile, the group has retained law firm Arnold & Porter to represent Chrysler dealers and Orrick, Herrington & Sutcliffe for its GM-affiliated members. Chrysler dealers have contributed $4,000 each to the legal fund, while GM dealers are putting in $2,000. Total collections now top $1 million for each fund, an individual familiar with the program said.
"You'd be an idiot not to," said Tom Bell, owner of a Chevrolet dealership in Redlands, who ponied up to join the GM defense fund.
Dealers across the country are also attending seminars on how to prepare for termination and the implications of bankruptcy, while hundreds, if not thousands, are hiring lawyers to protect them individually.
