Summary
GM's dealers will feel the pain, but it could be worse if the company entered Chapter 11 without the heads up they're giving. The current sales level cannot support GM's huge dealer body. It is likely that more dealer reductions are needed. Toyota's dealers are selling more than twice as many vehicles per store than GM. That is a tremendous competitive edge.
Analysis
GM could legally enter into Chapter 11 and allow the court to end all dealer franchises with no notice. Word on the street is the dealers are getting about 18 months to ramp down or convert to other GM brands. This heads up should help to reduce the pain a bit. More importantly it should expedite the Chapter 11 process.
With vehicle sales at a 30 year low GM sales volume cannot support the number of stores it has today. While many of the dealers, who are entrepreneurs in their own right, may find a way to survive, the reductions in product brands and the consolidation of GM's operations make it necessary to reduce the number of stores.
Toyota sells nearly 1,900 vehicles per store a year on average. At the current level GM stores will sell under 700 vehicles per year. This makes overheads costs for both GM and the dealers noncompetitive. Cutting 1,600 plus 400 (after ditching Hummer, Saab and Saturn) will not be enough to meet the competitive level.
