122 Local GM Dealers Await Possible Cutback News

By Kalyn Belsha in News on May 16, 2009 8:45PM

Just one day after the announcement Chrysler will cut 14 Chicago-area dealers and another 28 in Illinois, General Motors delivered some bad news to auto dealers as well. About 1,100 of GM's 6,000 dealers won't have contracts renewed after they expire in October 2010. While it is not known how many of those casualties are located in Chicago or Illinois -- GM said it does not have to release that information -- two local GM dealers say they have already received the dreaded notice.

Roseland Auto Sales Co. on Chicago's Far South Side and Tom Sparks Buick in DeKalb were told Friday that their contracts will be terminated June 9. About 120 other Chicagoland GM dealers are anxiously awaiting the possible arrival of similar bad news.

GM says it is giving dealers ample time to decrease their inventories and phase out their business. Dealers with contracts supplied by GMAC have the option to give cars back to GM and terminate even earlier than next year.

While many local auto dealers say they anticipated the cuts, they are surprised how little regard has been given to their long-standing partnership history. Roseland Auto Sales was started in 1933 by the now co-owner's grandfather. Bill Koloseike of Bill Kay Chrysler, a 40-year-old dealership which also got the ax, says the news was a "slap in the face." Stanley Balzekas, whose father started Balzekas Motor Sales on Chicago's Southwest Side in 1926, says Chrysler offered him no compensation, won't buy back his inventory and that he could lose up to $2 million.

While communities stand to lose hundreds of jobs and millions in sales tax revenues to the state, many industry experts say the phasing out and consolidation that will happen after these dealerships close or merge is necessary to rebuild the U.S. auto industry as a smaller, more profitable business. GM, Chrysler and Ford have thousands more retailers than their rivals from outside the U.S. [Tribune, Crain's]