General Motors may add dealers in coastal states

Published 3:22 pm Saturday, February 5, 2011

SAN FRANCISCO — General Motors may add dealers in big metro areas on the U.S. coasts because it expects sales there to grow, two top executives said Saturday.

It’s the opposite of the company’s stance just two years ago when GM got rid of about 1,700 dealers across the U.S. as it headed

into bankruptcy protection.

GM has been losing dealers on the coasts, especially in California, for two decades due to slow sales as people bought more foreign brands. Company officials say GM’s poor products also played a significant role.

Mark Reuss, GM’s North American president, said Saturday that the company’s dealership footprint on the coasts was destroyed by the lack of products, the financial meltdown and GM’s 2009 trip through bankruptcy protection.

The company, he said, wants to rebuild the network because its newer models, like the Chevrolet Cruze compact, are starting to sell better in coastal markets, and GM expects growth to continue as it rolls out more new products and the economy recovers.

“We know there’s areas where we should be that we’re not,” said Don Johnson, vice president of U.S. sales. “We didn’t have the product. We didn’t have the focus. We were irrelevant to California consumers.”

GM needs more dealers in the San Francisco and Los Angeles metropolitan areas and will look at other areas on the East and West coasts and around the Gulf of Mexico, the executives said. They gave no timetable for the changes and said they could move dealerships from depressed areas or add new franchises.

GM has only 227 dealerships in California, about the same number it has in Michigan, which has less than one-fourth as many residents.

The coasts have long been a tough sell for Detroit automakers and strongholds for Japan’s Honda Motor Co. and Toyota Motor Corp.

Last year, sales of General Motors Co.’s four brands, Buick, Chevrolet, Cadillac and GMC, rose 31 percent in California to 138,735. But that’s still about half the number of cars and trucks that the Toyota, Scion and Lexus brands sold in the state, according to the California New Car Dealers Association.

Japanese automakers controlled about half the market in California last year, while GM, Ford Motor Co. and Chrysler Group LLC combined had 30 percent.

GM and its Detroit competitors are far stronger in the nation’s mid-section. Nationwide, GM had 21.8 percent of the market last month, while Toyota had 14.1 percent, according to Autodata Corp.

Reuss and Johnson, speaking to reporters at the National Automobile Dealers Association Convention in San Francisco, would not give a time frame for adding or moving dealerships. They said the company has to be prepared for growth and it is focusing a lot of marketing on California.

“It takes time,” Reuss said. “We’re not there. It’s just some of it’s beginning to take hold.”

GM cut its dealership ranks from 6,150 before bankruptcy to just under 4,500 today. With fewer dealers sharing sales, the ones who are left are far more profitable, Reuss said. Ninety percent of GM’s dealers now make money compared with less than 40 percent at the end of 2009, he said.

The executives also said GM will expand lease deals for buyers with poor credit. GM Financial Co., the company’s recently acquired finance operation, just finished a successful experiment with lease deals in Ohio for buyers with credit scores of 620 or below. The deals, on the Cruze compact, will now spread to other states.

The executives conceded that GM Financial is competing on subprime deals with Ally Financial, GM’s own former finance arm, which was bailed out by taxpayers and is still 74 percent owned by the federal government.

Ally last week picked four investment banks to handle an initial public stock offering, people familiar with the plans said.

They spoke on condition of anonymity because they were not authorized to discuss the plans in public.

The Treasury Department hopes to get back at least some of the taxpayers’ $17.2 billion in bailout money through the stock sale. It’s the latest attempt by the government to recoup taxpayer money spent rescuing companies in the financial sector and auto industry during the economic downturn.