GM Attempts to Retain Customers of Rejected Dealers

On November 16, General Motors began sending letters to nearly 1 million customers of their rejected dealers offering incentives of $1,000 to $2,000 on most models in its four surviving U.S. brands. The letters state that the amount of the discount is dependent on a customer’s “likelihood to purchase a GM vehicle and the relative distance to the next closest dealer.”

Tamara Darvish of the Committee to Restore Dealers Rights said “This is an inappropriate time to take such an aggressive measure.” Darvish’s group of rejected dealers has been involved in negotiations with GM, Chrysler, the NADA and Congressional leaders in efforts to restore the franchises of a majority of dealers they feel were unfairly rejected this past summer.

Last summer, the House of Representatives passed a measure that would have forced GM and Chrysler to reinstate its terminated dealers but the legislation stalled in the Senate. Lawmakers have said that if the current talks fail to achieve an acceptable outcome, the legislation will be taken up again.

Recently, the Committee to Restore Dealers Rights, along with some Congressional members, has questioned GM’s commitment to the process and this latest move has fueled their skepticism.

Darvish asked, “If in fact dealer rights are to be restored, why would GM go in and move all those customers?”

GM spokesperson, Jordan Strosberg, said the letters have only been sent to customers of stores that have already lost their franchise or shut down their operations. She said, “This is our way of trying to keep our current customers in the GM family by making it easy for them to get back into a dealership.”

Strosberg said that customers who wish to take advantage of the incentives outlined in the letters must bring the accompanying certificate as proof of identity to a participating dealership by January 4.

GM is planning to extend a similar offer to former Saturn customers early in 2010 according to Strosberg.

In addition to cash incentives on the purchase of a new vehicle, GM is also offering services including tire rotations and vehicle inspections to customers of their rejected dealers. That offer will remain valid until next May.

Susan Docherty, GM’s head of U.S. sales, said the automaker launched the incentive program in an effort to liquidate excess 2009 model year inventory. senior analyst, Micelle Krebs, contends that GM’s actions are justifiable given the highly competitive nature of the auto industry. She said, “GM has to use aggressive marketing to try to keep those customers in the fold. There are other brands waiting to pick those people up.”

Last week, Chrysler Group launched new cash incentives ranging between $1,000 and $1.500 on many of its 2009 and 2010 models.

Like Krebs, J.D. Power & Associates analyst Jeff Schuster understands the motivation behind GM’s new incentive offer. He said, “GM is working with a new foundation of fewer brands. New product is obviously a key component to success, but the rebuilding can’t continue without a strong customer base. Loyalty is the name of the game here. It is much harder to get back a displaced customer than bring in a new one and GM is proactively going after buyers that may be at risk."

In a November 16 report to the Obama administration’s auto task force, GM reported that 1,839 of its dealerships have agreed to close by October of next year. Long-term, the automaker plans to shed between 3,600 and 4,000 dealerships from its current network of 5,860.

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