The Eagle Blog

The Fallout From a Failing Company – GM

I have been reading accounts of local Ottawa GM franchises that are caught in the mess as GM moves slowly but surely towards bankruptcy, and as part of its restructuring is closing 2,600 dealerships.

So one of the casualties of this debacle is the dealer network, many of whom are family owned businesses and have been in business for decades. Their investment in those franchises has been significant … and now they are faced with the prospect of reinventing themselves, or they too will join GM on the “scrap heap” of failed businesses.

As a business owner I have a ton of sympathy for these people … the profile is fairly typical. They will be hard working stalwarts of their community, who know the new car business and have been evolving their business with significant personal investment for many years. They will likely have a loyal group of employees, mechanics, sales people, administrative and accounting people.

What can they do? What would you do?

Option 1. Sell … obviously their asset is not worth anywhere near as much as it was a year ago, but it is worth something.

Option 2. Change brands … sell a different model. A tough option at this point, there are something like 2,600 dealerships being closed so other car companies will have lots to choose from.

Option 3. Become a service centre. A possibility that will probably require more training for their mechanics and potentially investment in more equipment as opposed to GM specific tools. The dealerships will then be competing with generic service centres … an interesting challenge from an ROI standpoint.

Option 4. Sell used cars. Another possibility, but that is a crowded market too. Coupled with Option 3 it might be a survival strategy that could, help the dealership limp along until a better option is found.

Option 5. Sell something else … farm equipment, motorbikes, skidoos or other mechanical type equipment. A bigger stretch and requiring investment in training and learning about a different but related industry.

Option 6. Do something totally different! Get some advisers, look at their assets and devise a way to capitalise on those assets and reinvent their business into a totally different realm. Companies have achieved this and it carries the highest potential for reward … and the greatest risks.

Whatever they choose to do these business owners are faced with what is probably their toughest business challenge.

The interesting thing about owning a business is that it can happen to any of us … disruptive technologies, new business models and innovative solutions can put any of us in a position that we need to reinvent or die.

Perhaps the right answer is to change first … before the change is forced on you. That requires foresight, knowledge, courage, innovation and an entrepreneurial flair that is rare. It does however make you a first mover in your market and THAT is where the higher returns are. So maybe those dealerships that remain should be investing in their changes NOW!

It would be a great MBA project for local universities to take on … helping their local GM dealerships to weather this storm!


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2 thoughts on “The Fallout From a Failing Company – GM

  1. Kevin, first allow me to say congratulations on the Consumers Choice award!

    Second, for dealerships – it is a tough situation. as you state, very few manufacturers are looking for extra sales locations at this time.

    Some may go to used vehicles, and business owners that own a GM dealership along with another manufacturer dealership – may just try & consolidate.

    As well as the dealerships themselves, some reports put the "trickle down" employment effect at between 6 and 8.

    That means that for every automotive position eliminated, that between 6 and 8 others lose their jobs.

    Those 'others' being all those that provide services from accountants, day cares, to the kid at the corner store.

    Regards

  2. Kevin, first allow me to say congratulations on the Consumers Choice award!

    Second, for dealerships – it is a tough situation. as you state, very few manufacturers are looking for extra sales locations at this time.

    Some may go to used vehicles, and business owners that own a GM dealership along with another manufacturer dealership – may just try & consolidate.

    As well as the dealerships themselves, some reports put the "trickle down" employment effect at between 6 and 8.

    That means that for every automotive position eliminated, that between 6 and 8 others lose their jobs.

    Those 'others' being all those that provide services from accountants, day cares, to the kid at the corner store.

    Regards

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