GM: Some Dealerships Could Be Restored

General Motors world headquarters is shown in Detroit, in this Tuesday, April 21, 2009 file photo. GM said Wednesday May 27, 2009 that not enough of its bondholders agreed to swap their debt for company stock, meaning the troubled automaker is almost certainly headed for bankruptcy protection. (AP Photo/Paul Sancya, File)
AP Photo/Paul Sancya
Hundreds of the 1,350 General Motors Co. dealers who lost their franchises last year could see them restored in a congressionally mandated arbitration process that begins later this month, the company's interim CEO said Wednesday.

CEO and Chairman Ed Whitacre Jr. also said that new Chief Financial Officer Chris Liddell is a candidate for the CEO post. And Whitacre said he's not confident about selling the Swedish Saab brand.

In a wide-ranging talk with reporters at GM's Detroit headquarters, Whitacre also predicted that GM would be profitable this year, although he said that was dependent on the economy and other factors.

GM had planned to close the 1,350 dealerships this year in an effort to dump poor performers and better align its dealer base with much lower consumer demand for autos. In many cases, GM had dealerships too close to one another and competing too much on price, the company said.

Congress passed legislation late last year that forces GM and Chrysler Group LLC, which shed 789 dealers last year, to give dealers a chance to appeal closure decisions. Both companies went through bankruptcy protection earlier this year and are receiving government aid.

Whitacre said the company had a "pretty arbitrary cutoff point" for shedding dealers, and that it probably made mistakes in getting rid of some of them.

When pressed, he said "hundreds of dealers" may be closer to 100 than a thousand, but it's a "substantial number."

Restoring some dealerships could be good for the company because they would sell more cars for GM. But it also could be bad if a "lousy dealer" with a poor storefront got a franchise back, he said.

When the franchises were revoked last summer, GM officials said dealers were judged on whether they met sales goals, customer service scores, the condition of their buildings and other criteria. They were allowed to stay open through October to sell their inventories.

Under pressure from dealer groups and lawmakers, GM and Chrysler put out proposals that would have allowed dealers to challenge their closure through arbitration. But a bill passed by Congress allows dealers to bring a much wider range of proof that they are profitable, raising the possibility that they could remain open.

Dealers have until Jan. 25 to tell the automakers if they will appeal.

Chrysler CEO Sergio Marchionne hinted that the company might sue over the law, but Chrysler has not yet taken legal action.

Whitacre also told reporters that he would consider Chris Liddell, the CFO hired from the same post at Microsoft Corp., in the search for a new CEO.

Liddell, 51, announced before GM hired him that he would leave Microsoft to pursue a higher-ranking position.

Liddell was hired late last month as CFO, the first permanent top manager hired from outside the traditionally insular GM since the company left bankruptcy protection in July. He replaced Ray Young, who transferred to GM's China operations.

At Microsoft, Liddell developed a reputation for holding down costs while building up cash. He instituted a plan to cut $3 billion from the technology company last year that included its first mass layoff, wage freezes and cuts in travel and other expenses.

GM has hired a search committee to find candidates, but it has not presented any yet, Whitacre said.

GM is majority owned by the federal government and Liddell was granted an exemption from government imposed pay caps to take his post. He will be paid $750,000 this year, but will get up to another $5.45 million in stock starting in 2012 if GM successfully sells its shares to the public.

Whitacre also said he is not optimistic for a deal to sell its Swedish Saab brand. GM is phasing out Saab and expects to start closing plants this week.

GM has been in talks to sell Saab during the past month with Dutch exotic car maker Spyker Cars. It has also heard from other suitors after an attempt to sell the brand to a consortium led by Swedish sports car manufacturer by Koenigsegg Automotive AB fell apart in November.

But Whitacre said he is not confident a deal can be reached.

"It's real easy. Just show up with the money and you can have it," he said. "Nobody's come with the money, so were in the wind down deal here."