GM Cuts Worry Minority-Owned Dealers

General Motors is sending out notices this week to more than 2,000 dealers that it wants to shut down as the company struggles to stay afloat. Minority dealers are especially worried that GM's restructuring efforts could wipe out years of progress toward building their ranks.

At Michael Chevrolet in Chesterfield, Mich., outside Detroit, a sea of unsold cars sit in the lot, and there are no customers in sight. Michael Johnson, the owner of this dealership, got his start through GM's Minority Dealer Development Program.

"When I first got into the business, there were probably about 110, 115 African-American General Motors dealers, and today we are down to 40."

Johnson's office looks out onto the showroom floor. The desks where salespeople used to sit are mostly empty. Johnson has cut his staff by half in the past year. He says while his business problems are shared by others, minority car dealers expect the worst as the company decides which dealerships get the ax.

GM is looking at factors including customer satisfaction, sales and location.

Desmond Roberts is a car dealer in the Chicago area who heads the National Association of Minority Automobile Dealers. He says those criteria could doom most minority car dealerships.

"Minority dealers came to the party late. We had the worst opportunities in the worst locations," Roberts says.

But some industry observers say with GM on the brink of bankruptcy, it's in no position to keep any underperforming dealerships open.

"Do minority dealers have something to worry about? Yeah, some probably do, but some are performing very well. And if you look at some of the rural dealerships, they're going to have problems. So it's really got to be based on performance metrics," says Erich Merkle, an independent auto analyst.

GM spokeswoman Susan Garontakos says the company plans to cut 2,600 dealerships by the end of 2010. That's about 40 percent. She says GM's assessment is colorblind — the company is making decisions regardless of who owns a dealership.

"When a dealer raises their hand to become a GM dealer, there are some clear expectations that are outlined in their sales and service agreements. That applies for all groups of dealers," Garontakos says.

Back at Michael Chevrolet, a salesman is trying to work out financing for a customer who wants to buy a new Chevy TrailBlazer.

It's one more sale that will help owner Johnson clear his eight-month vehicle backlog.

Johnson credits GM with helping him get his start as a dealer 20 years ago and says it would be a shame if this latest round of restructuring erased GM's progress in attracting minority dealers.

"I think that there's got to be some kind of a special effort to preserve those of us that are left," he says.

Johnson says even if he does make the list of dealers that get to remain open, he's worried about having enough cash to keep his business afloat. He says the next step will be getting the banks to lend dealerships the money they'll need if GM goes into bankruptcy.

Sarah Hulett reports for Michigan Radio.

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