In late summer 2010, after making it through the remainder of scheduled arbitration hearings, General Motors Co. is going to end up with approximately 4500 dealers remaining in the United States. Before declaring bankruptcy and requiring bailout funds from the U.S. government, there were 6150 GM dealerships in the country. Since the bankruptcy in 2009, approximately 2000 franchised GM dealer agreements have been terminated. The reason behind the terminations is the new GM philosophy that a smaller dealership network will save the company money. GM also believes that by limiting the number of locations, the average number of sales, and profits from those sales, will increase significantly at each dealership.
Mark Reuss, North American President for GM, disclosed the information in a meeting with financial analysts and bankers at GM's Warren Technical Center. The purpose of the meeting was to brief those analysts and bankers on the company's financial plans concerning public stock offerings. Reuss stated, "We are strategically aligning these franchise points so we don't have overlap." He also said that GM would end up with about 4800 dealerships once all of the arbitration hearings are completed in August, although the exact number will be dependent upon the conclusions of the hearings.
GM dealers around the country are complaining because they cannot understand any rationale that justifies the agreement terminations. 1160 separate dealers actively challenged the forced terminations. As a result, GM offered to reinstate nearly 700 of them. Of those, just about 600 excepted the reinstatement terms offered by GM. The remainder of the dealers are continuing to attempt to initiate further arbitration hearings.
GM is working hard to convince investors that it still presents a solid investment opportunity. Savvy investors need to believe that an automaker will generate sufficient revenue in order to fund research and development for new vehicles, maintain excellent manufacturing standards for current vehicle lines, and simultaneously take care of all other aspects of running an international auto manufacturing corporate giant.
GM Chief Executive Officer and Chairman, Ed Whitacre stated in the meeting, "We're not reintroducing GM today. We're introducing a new GM, because we are a new and much different company than we were 12 months ago." He went on to report on first quarter profits totaling $865,000,000. He said that GM plans to invest more than three billion dollars this year in new and existing manufacturing plants. Further, he stated that GM has already repaid $6.7 billion in bailout funds to the United States government and more than $1.4 billion to the Canadians. GM's bouncing back very nicely and expected to benefit heavily from the initial public stock offerings scheduled for late 2010. GM will once again become a company traded publicly. Becoming a publicly traded company is the first step in convincing the government to sell off its ownership stakes in the auto giant.
GM's bailout conditions included swapping $43,000,000,000 in bailout funds from the United States Treasury in exchange for a 60.8% share of the company. Reuss added in that the company forecasts a 46% growth rate in US sales before 2014, meaning the annual number of units sold will increase from 12,000,000 up to 17.5 million. When the public is allowed to purchase stock, perhaps as soon as October, it is expected that $20,000,000,000 will be raised and the United States Treasury Department will then divest at least 20 percent of its 61 percent ownership stake.
GM's major growth of 45 percent between now in 2014 will be a result of increased sales an India, China, Russia and Brazil. Additionally, the automaker is scheduled to launch 70 new vehicles on an international basis by 2014. GM is on a voyage into the future, and part of that voyage apparently includes the abrupt termination of as many as 2000 individual dealership agreements.
