General Motors Corp. is planning to reduce its national dealership network by 42 percent by the end of next year, and it will eliminate the Pontiac brand as it seeks to cut costs and avoid bankruptcy. A leading spokesman for Texas car dealers said he expects the brunt of the dealer downsizing to be felt elsewhere.
"The face of the dealership industry in Texas is not going to be altered to a great degree," said Bill Wolters, president of the Texas Automobile Dealers Association. "We think product will continue to flow and warranties will continue to be paid. All the things that happen now will continue to happen. We are not quite as exercised as folks in other states."
Texas has 1,348 dealerships, including 391 that sell GM brands. But Wolters noted that Texas also is the country's biggest domestic car market and that dealers are spread over more than 300 towns and cities.
Many small-town Texas dealers continue to be profitable, Wolters said, because they have less local competition.
"We feel like there will be some adjustment in dealer count in Texas, but we truly believe that the great majority of those (reductions) in Texas will come of the dealers' own volition," Wolters said.
Texas has one of the country's strongest franchise laws, and Wolters said he is optimistic that GM will compensate dealers who lose their franchises.
But bankruptcy lawyers have speculated that a GM bankruptcy filing could override some of the protections in the state's franchise law.
If GM winds up in bankruptcy court, Fort Worth bankruptcy lawyer Michael McConnell said, the protections of state law could be in conflict with bankruptcy law.
"There will be a collision of interests here between trying to protect the debtor company and the dealerships," McConnell said. "There will be a legal battle here."
Wolters said some of his optimism comes from how easily GM dealers in Texas handled the end of GM's Oldsmobile brand in 2004.
When that happened, "it didn't create a ripple in Texas," Wolters said.
"There were no stand-alone Olds dealers in Texas. They became Buick, Pontiac or GMC dealers, and the manufacturers compensated them for terminating their franchises. We think that will happen again."
Chuck Nash, who owns a Chevrolet-Buick-GMC-Pontiac dealership in San Marcos, said he and other dealers are having to adjust quickly to changes in the industry during a prolonged slump.
"You adjust on the fly, and you come to work, read the news and go out and answer customers' questions," Nash said. "Once the government said it was going to stand behind the warranties, that was the main concern that customers had."
The plan for many car dealers, he said, is to weather the current slump and emerge stronger when the recovery arrives.
"That's the name of the game," Nash said. "Get through 2009, and it will be better in 2010 or 2011. That is the strategy."
If Pontiac is shut down, he said, "it is not a disaster in my case. If I were a single-point Pontiac dealer, it may be another case."
Despite the uncertainty caused by Monday's announcement, Round Rock GMC-Pontiac dealer Nyle Maxwell said he was confident that his dealership will survive and be successful.
"We are telling our customers and employees that Nyle Maxwell Pontiac GMC is going to be in business tomorrow, next month and next year. We are not going anywhere, and I plan to be in a car business for a long time to come."
Maxwell said his Round Rock dealership has a strong track record and a solid business.
"We feel like General Motors wants us to be a part of their future, and we certainly want to be," Maxwell said.
GM brands accounted for about 19 percent of all new-car registrations in Central Texas last year, but Pontiac was only 1 percent of the total, according to R.L. Polk Co., a market research firm.
