Moorestown dealer hopes to renew ties with GM

Tom Hessert Jr. once drove 215 m.p.h. as a race-car driver. Until last spring, he sold 400 to 500 new Chevys a year as owner of Classic Chevrolet in Moorestown. Then General Motors waved a red flag: As it plotted its emergence from a historic federal bailout and bankruptcy, GM told Classic Chevrolet and 2,000 of its counterparts it no longer needed them.

Hessert and others decided to fight back. Aided by a new law enacted in December, 1,160 dealers demanded arbitration.

This week, Hessert finally got some good news from the Detroit automaker, once the world's largest: a phone call advising him that Classic Chevrolet was among 661 dealers that GM planned to offer a second chance.

Hessert is still awaiting a letter formalizing GM's new offer. When it comes, he expects to have some business and financial hoops to jump through. But yesterday, he pronounced himself "relieved and happy."

"I grew up wanting to be a Chevy dealer, and I want to die a Chevy dealer," Hessert, 57, said.

He has managed to stay in business, as have most of the dealers that GM targeted in June with letters telling them they had until October 2010 to "wind down" their franchises.

That was better than how the "new Chrysler" has treated many of its old dealers. In bankruptcy, Chrysler swiftly terminated nearly 800 dealers, saying it needed a slimmer and trimmer sales network to compete in a U.S. auto market that recorded fewer than 10 million sales last year, down from a peak of more than 17 million nine years earlier.

But GM did not make it easy. Hessert was told, for example, that he could no longer order new cars to add to his inventory. Although he was able to obtain some from other dealers, he was forced to fill his showroom with used vehicles. New-car sales dwindled to one or two per month.

Hessert kept Classic Chevrolet afloat with revenue from used-car sales, maintenance, and repairs. To survive, he had to cut about 20 employees from his 55-person payroll.

Hessert said he did not try to hide the news, painful as it was. "I thought it was only fair to notify all my employees what was going to happen," he said.

He said he hoped to bring back as many as possible, but that will depend on how successful he is in rebuilding the franchise, a task industry observers warn could be difficult.

GM has declined to say which dealers were granted a reprieve, just as it previously declined to identify those told to wind down, but it says it tried to anticipate how arbitrators would rule.

"The law charges the arbitrators with looking at what's best for the manufacturer, the dealers, and the community," spokeswoman Ryndee Carney said. "So we looked at it through that lens."

Some dealers have already closed, including some not targeted by GM, Carney said. She said GM currently counted about 5,500 nationwide, down from 6,200 at the end of 2008.

GM's shrinking dealer network reflects the decline in U.S. sales, which in turn mirrors a worldwide slowdown for the automaker during the Great Recession.

Jeff Schuster, an automotive analyst at J.D. Power & Associates, said GM sold 8.5 million cars, vans, and light trucks worldwide in 2007, the year the recession began. GM sales dipped 14 percent in 2008, to 7.3 million vehicles. Last year, they continued their fall, dropping an additional 18 percent to 6.0 million.

Schuster said U.S. sales were erratic last year as incentive programs such as "Cash for Clunkers" came and went. But he said the U.S. market had recently shown signs of stabilizing and was on pace to hit 10.8 million sales in 2010.

Schuster said the revamped GM still faced challenges, including how to keep customers of discontinued brands such as Pontiac and Saturn. One unexpected benefit came from the recent safety problems of Toyota, the Japanese company that replaced GM as the world's No. 1 automaker.

"There's still a lot of work ahead in terms of reinventing themselves," Schuster said. "It takes a little time to work things through the system before we'll truly see how consumers will respond."

A reprieve from GM may not be enough to restore all 661 dealers to viability, said Stephen A. Moore, a lawyer who heads the auto-dealer practice at Harrisburg's McNees, Wallace & Nurick L.L.C.

Moore's firm represents more than a dozen Pennsylvania dealers who decided to appeal GM's June decisions. He said yesterday that about half had been told to expect "letters of intent" outlining terms for their reinstatement.

Though he has not seen any of the letters, Moore said he expected they would give dealers 60 days to show they can "meet standards for capitalization and facilities" as well as other requirements.

"Unfortunately, simply getting a call saying you'll receive a letter of intent is not a guarantee that you'll be able to continue," Moore said.

At least for now, Hessert is confident. Although he has owned a Jaguar and Saab dealership longer, he has always loved the Chevy brand and especially the Corvette. He is ready to forgive and restore the dealership he has owned since 1987.

"I think there was a mistake made in my case, and in a majority of cases," Hessert said. "Everybody makes mistakes in life. Now the wrong was righted, and we can move forward."