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Bob Thomas of Bob Thomas Car Co. received a letter Tuesday requesting that the company sign an agreement to wind down his business by 2010. The dealership had previously appealed GM’s action, and Thomas is still hopeful that it will go through.
Pete Erickson / The Bulletin
For local dealerships, a shifting landscape
As Bend’s only GM dealer fights for its franchise, others are trying to find balance in a tough market
By Jeff McDonald / The Bulletin
Published: June 03. 2009 4:00AM PSTUpon the heels of General Motors’ Chapter 11 bankruptcy filing Monday, Bend-based Bob Thomas Car Co. got a letter Tuesday that gives the longtime dealership until June 12 to sign an agreement to wind down its business relationship with the Detroit-based automaker by fall 2010.
Bob Thomas is still awaiting word on its appeal of GM’s decision to trim the dealership from its dealer network, which Bob Thomas says would leave Central Oregonians with only one GM dealer, in Madras, to buy GM vehicles and get their vehicles serviced under warranty.
The Bend-based GM and Honda dealer, which has been in business since 1916, would gain about $300,000 worth of incentives by signing the “wind-down agreement” and would retain its GM franchise through October 2010, said Bob Thomas, company president. Not signing it could mean the dealer would be considered part of the “old GM,” which could result in the franchise agreement being cut earlier, Thomas said.
While about 1,300 dealers out of the car company’s roughly 6,000 dealers nationwide got the wind-down agreement letter, the rest got what are being called “participation agreements,” some including stipulations that a dealership make changes in order to be part of the automaker’s new company. In Bob Thomas’ case, that could mean dropping the Honda franchise from under the same roof, Thomas said.
“I don’t think that receiving the wind-down letter is conclusive proof that our appeal has been denied,” Thomas said. “I would not choose to sign either the wind-down agreement or the participation agreement without studying them. One of the things they may say is, ‘We may not have Honda here.’”
Losing its GM franchise sooner than October 2010 could result in a fire sale of existing inventory, as the dealer would look to unload its roughly $4 million worth of GM cars and trucks, Thomas said.
That would be the worst-case scenario, he said. Sales this year for all brands have been slow as consumers put off buying cars and trucks in the midst of a severe economic recession.
Gary Gruner Chevrolet-Buick-Pontiac in Madras, meanwhile, is poised to become the sole GM dealership in Central Oregon if Thomas’ appeal is denied.
Sales have tripled since GM’s May 15 announcement that it was cutting 1,300 dealers, said Gary Gruner, who owns the dealership. New customers include those from Bend, he said.
He had not received a letter by noon Tuesday but had spoken with a Detroit-based GM official who said his dealership did not have to make any changes and that it was on the list of dealers receiving participation agreements, Gruner said.
“They said, ‘Sign it and send it back — congratulations and welcome to the new GM,’” Gruner said. “There were no stipulations and I am good to go.”
If Bob Thomas cannot remain a GM dealer, Thomas would like to continue to service GM cars and trucks and sell GM parts, he wrote in his appeal letter sent last week.
Bob Thomas could play a role in Gary Gruner’s future plans as the Madras-based dealer said he would consider opening a GM dealership in Bend if Thomas lost his franchise or could not continue to service GM vehicles, Gruner said.
“I would certainly look into that,” he said. “It is too early to see what GM is going to do given their current bankruptcy. A lot of it also depends on what Bob Thomas does. I wouldn’t infringe on Bob’s market.”
Another GM dealer, Dave Hamilton Chevrolet-Jeep of Redmond, also received a letter May 15 that it would not be renewed as a dealer in October 2010. The company, which filed for Chapter 7 bankruptcy May 22, also will lose its Chrysler franchise June 9. The company could not be reached for comment Tuesday.
Nationwide, dealers have the lowest inventory of GM vehicles in the company’s recorded history since at least the mid-1970s, said John McDonald, a Detroit-based GM spokesman.
“We have purposely pulled inventory down because there is no marketplace for them,” McDonald said, noting the company has been reducing its inventory for two years and has 16 percent less inventory than at the start of the year. “Vehicles aren’t there at levels that people think they are. We have dramatically cut production and dramatically reduced our inventory in response to the marketplace. The demand just isn’t there.”
McDonald would not comment specifically on any Central Oregon dealerships, but he said the company is trying to create a dealer network that meets existing demand.
“In some cases, that requires franchise agreements to end or we may have consolidations,” McDonald said. “In other cases, it means dealers will have to take on brands they haven’t had before. We are trying to become more efficient for consumers. We have seen a dramatic drop in the marketplace.”
Dropping demand for vehicles started last year when gas prices skyrocketed in early spring and has resulted in more competitive pricing, said Jeff Robberson, the owner of Robberson Ford-Lincoln-Mercury-Mazda in Bend and Prineville.
The bankruptcy filings by GM and Chrysler, the latter of which announced it was ending its relationship with Bend-based Thomas Sales and Service and Dave Hamilton of Redmond last month, leaves Ford in a very strong position, Robberson said.
“It is an extremely competitive market right now,” Robberson said. “The whole industry is down. The pie is smaller. On a national basis, it is very aggressive. We see that in very favorable rates and payment programs. There are not a lot of customers out there, so we are all pricing our inventory to a level where customers will respond.”
Jeff McDonald can be reached at 541-383-0323 or at jmcdonald@bendbulletin.com.
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