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245 GM Canada dealers get the axe

Auto maker sends out letters telling them their fate; thousands of jobs stand to be lost

The Canadian Press

TORONTO — General Motors of Canada Ltd. has confirmed it is informing almost two-fifths of its dealers that their sales-and-service relationships with the auto maker will end.

A spokesman said letters were being sent Wednesday to about 245 of GM Canada's 709 dealerships, and further consolidation is expected to increase the number of shuttered locations beyond that number by the end of 2010.

Spokesman Stew Low added that the auto maker will not publicly release a list of dealers facing the axe.

GM said that the “rationalization” is focused on key urban markets, and it aims to accomplish the reduction “in an orderly, cost-effective and customer-friendly way.”

The result, it says, “will be a more competitive dealer network with higher volumes, while continuing to maintain the strongest and broadest dealer network in the country.”

While GM Canada has cut its direct work force to 12,000 people, the dealer chain is estimated to employ 33,000 people.

“The economic implications, of course are huge,” said Michael Hatch, chief economist at the Canadian Automobile Dealers Association.

“People look at the auto sector, sometimes, and they think it's just Detroit and Oshawa and Windsor, but dealerships are the retail presence ... and everybody knows that they're located in virtually every community in the country.”

While dealers normally see their sales shrink in economic downturns, they now face closings and thousands of job losses.

Marc Comeau, GM Canada's vice-president of sales and marketing, last week said the company plans to pay all the money it owes dealerships.

One dealer pointed out, however, that if he is forced to shut down and let his 60 employees go, legacy costs will be between $700,000 and $800,000.

“Who is going to pay that?” the dealer asked at the time.

GM Canada spokesman Stew Low last week said the auto maker has recently spoken with all its Canadian dealers.

“Our objective in the next few weeks is to achieve solutions that will best serve our current and future customers while also recognizing some of the unique aspects of our Canadian dealer network,” Mr. Low said.

U.S. dealers who sell less than 35 cars a year were among those notified in the first round of cuts.

Wednesday's GM announcement — following last week's termination notifications to about 1,100 U.S. dealers — came as the auto maker continued talks to extract further concessions from its Canadian unionized work force.

The Canadian Auto Workers told members Tuesday that the “incredibly intense” talks “are approaching a moment of truth.”

A May 15 deadline set by the federal and provincial governments has passed, and the governments “continue to interfere in the process, making new demands all the time,” the union said.

Federal Industry Minister Tony Clement said Wednesday that his officials have told him progress has been made.

“As long as we're moving in the right direction, not the wrong direction, I'm willing to be patient on this,” Clement told reporters in Washington.

With files from Globe and Mail reporters Greg Keenan and Karen Howlett

NOTE: If you're one of the dealers who has been notified by General Motors of Canada please e-mail Greg Keenan at gkeenan@globeandmail.com or Shawn McCarthy at smccarthy@globeandmail.com

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