As someone who knows a little something about this field, I was stunned to read that GM "will be" terminating 1,100 of its auto dealers.
http://news.aol.com/...
GM says it wants to cut "costs" and to mirror Chrysler's decision to get rid of almost 800 auto dealers.
I frankly do not know GM's real reason for the dealer terminations, but I can assure you of one thing: if they want to get rid of 1,100 auto dealers, GM is going to need to file for bankruptcy protection.
Automobile dealerships are generally run by families with a great deal of political clout. If you want to terminate an automobile dealer, you need to comply with the applicable dealer protection statute of the state where the dealer resides. Last I looked, all 50 states had dealer protection acts.
While a guy who buys a Subway or a McDonald's franchise generally has no state law protection from termination (about 10 states offer some protection), an auto dealer is protected by some of the strongest state statutory schemes known to man. How strong is the auto dealer lobby? An auto dealer is one of the few individuals in America against whom a pre-dispute arbitration clause cannot be enforced. So, if an auto dealer signs a dealer agreement saying he will arbitrate all future disputes? Not enforceable.
State protective statutes prevent GM from terminating dealers except for "good cause." Good cause is generally defined as a material breach of contract by the auto dealer. Almost every statute lists a number of things typically done or not done by dealers that are per se not "good cause.'
If GM believes that it can terminate 1,100 dealers who have not breached their contracts because GM needs more money, they are going to lose 1,100 pieces of litigation. The desire to terminate a dealer for monetary reasons is certainly not "good cause."
GM can escape these dealer obligations only by filing for bankruptcy protection. Bankruptcy law will give GM the choice to pick and choose what dealer contracts it wants to keep and what contracts it wants to reject.
The true reason that GM wants fewer dealers? Probably some cost savings, but also probably the desire to finally get rid of some dealers who they don't like and the desire to prefer certain "easy to get along with" dealers to dealers who have been more of a pain in GM's ass.
But back to the point -- GM can't terminate these dealers unless it wants to spend millions and millions of dollars on wrongful termination lawsuits. So if GM really wants to get rid of 1,100 dealers, the chances of GM filing for bankruptcy protection? I would say 99%.