June 1, 2009 - General Motors Dealerships - Nationwide

GM to dissolve 2,100 dealers

General Motors Corp. will pare 2,100 dealers from its business, and has until July 10 to complete the remix of its assets in bankruptcy court paid for by the Obama administration, according to filings today.

In an affidavit, GM Chief Executive Fritz Henderson also reveals that the company looked for investments from foreign governments and considered selling OnStar, but was unable to do either as the economy collapsed last year, leaving the Obama administration plan as the only choice.

“There simply is no viable alternative,” Henderson said in the filing. “There is no other sale, or even other potential purchasers, present or on the horizon.”

Under the plan GM will sell “substantially all” of its assets to a new company that’s owned by the U.S. and Canadian governments, the UAW health-care trust fund and bondholders. The U.S. government will lend $30.1 billion, with the Canadian and Ontario governments pitching in an additional $9.5 billion.

For the first time, Henderson said the new GM will accept 4,100 dealer contracts out of 6,000, leaving 2,100 in the old company. GM had sent letters earlier this month to 1,100 dealers, saying their contracts would be ended by late next year.

Henderson said the new GM would sign “deferred termination agreements” with most of the dealers targeted for closure, giving them up to 17 months notice, to ease their hardship.

The plan will allow “thousands of dealerships to survive, while providing for an orderly wind-down of those dealerships not being retained,” Henderson said. “The alternative to the exercise of sound business judgment is that the Company would liquidate – and all dealerships would cease to be GM dealerships.”

Henderson said GM’s sorry finances and the weakening economy had left it with no other choices to survive. It had talks with “foreign entities” and sovereign wealth funds about investing in the company, but no accords were reached.

Henderson said GM first broached the idea with Daimler of buying Chrysler in 2007 as a cost-saving move. But after some talks, GM decided a deal “would only exacerbate GM’s exposure to a dwindling U.S. automotive market with mounting costs and supplier concerns,” and it quit negotiations.

While GM restarted talks in August 2008, the economic collapse the following month locked down corporate credit, and GM pulled out in November.

Henderson said GM also considered selling OnStar, believing it could get $2 billion to $4 billion.

Original Story - Detroit Free Press