GM gets court OK to reject sales and service contracts with 33 dealers

By Jennifer Lanning Drey

Portland, Ore., Aug. 3 - General Motors Corp. received court approval Monday from the U.S. Bankruptcy Court for the Southern District of New York to reject sales and service dealership agreements with 33 dealers, according to a source familiar with the case.

The company had originally requested approval to reject sales and service dealership agreements with 38 dealers but reached settlement agreements with three dealers prior to the hearing.

Additionally, two dealers are being allowed to receive additional information from GM on the evaluation of their dealerships and based on that information can submit an additional pleading demonstrating that an evidentiary hearing is appropriate, according to the source.

When requesting the approval to reject the contracts, GM said a reduction in the number of its dealerships was a necessary component of the company's "rationalization effort" and was carried out through a "comprehensive, objective and quantitative evaluation of each dealership."

Specifically, GM said it considered minimum sales thresholds, customer satisfaction indexes, working capital needs, profitability, whether a dealership sold competing non-GM brands, dealership location and other market factors.

The agreements being rejected were those that did not choose to participate in GM's participation or wind-down agreements.

GM, a Detroit-based automaker, filed for bankruptcy on June 1. Its Chapter 11 case number is 09-50026.

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