General Motors faces costly route to scrap Hummer

WASHINGTON — The Frank Kent Hummer dealership — complete with an indoor waterfall and a massive curved roof reminiscent of an aircraft hangar — opened in Fort Worth in spring 2005 with hopes as high as the giant "H" that dominates its entrance.

Three years later, General Motors wants to get rid of its lagging Hummer brand. But what's good for GM in this case may not be good for its 400 Hummer dealers, who have invested millions of dollars with the expectation of selling a line of new products for years to come.

Moreover, auto dealerships are protected by stringent franchise laws around the country and by contracts with manufacturers that make it difficult — and potentially costly — for automakers to walk away from brands. And dealers, who are politically powerful, are mobilizing elected officials to provide further cover as the industry prepares for a huge overhaul.

"To think they'd sell the franchise and leave the top 150 dealers hanging, I don't think they'll do that," said Will Churchill, co-owner of the Frank Kent Motor Co., which paid to build the $3.5 million Hummer dealership to GM's specifications. "They'll do something to help minimize that blow."

Dealerships represent one thorny issue facing automakers, whose production capacity currently exceeds what is needed to supply the U.S. car market. Eliminating brands and closing down dealerships is central to their strategy for survival. GM dealers are the biggest target; the company has about four times as many dealerships as Toyota even though the two firms sell about the same number of cars in the United States. GM told Congress last week that it plans to shed 1,700 of its 6,400 dealerships by 2012.

Gone are the days when a company would pursue a strategy of making "a car for every purse and purpose," as GM's chief executive Alfred Sloan put it in the 1924 annual report. Last week, GM Chief Executive Rick Wagoner said the company would focus on just four brands that make up 83 percent of the company's sales.

But untangling the web of relationships to dealerships could be time-consuming and costly.