Dealers to bear brunt of GM cuts in Minnesota

While Michigan, Ohio and Indiana are expected to be hardest hit by General Motors Corp. bankruptcy, Minnesota will not be immune. The long arms of GM's downsizing will reach some of the state's 149 GM dealerships, and perhaps some of the thousands of workers in Minnesota's auto supplier industry.

State sales tax collections could also take a hit, but State Economist Tom Stinson said Monday that it's still too difficult to forecast that reduction.

He expects the biggest economic effect will be on the dealerships in the state, not on manufacturing.

Indeed, Minnesota dealers are holding their collective breath.

Two weeks ago, GM planned to shutter 1,100 dealerships nationwide by the fall of 2010, including 30 in Minnesota. Now the plan is to not renew contracts with roughly 2,600 dealers -- and whether targeted dealers keep their doors open that long remains to be seen.

Scott Lambert, spokesman for the Minnesota Auto Dealers Association, said some of those additional closings are expected to be in Minnesota. "There will be another wave, and it's going to be painful. We have all been kind of worried about it."

Nationwide, dealerships average 53 workers each, according to the National Auto Dealers Association. In Minnesota, that's nearly 1,600 jobs on the chopping block.

Such a move would combine two GM brands under a single roof and give the survivor some heft. But choosing the survival of one dealer over another in the same town will cause anger in communities across the country, dealers and association officials said.

While some dealers are expected to contest GM's plans, it is unclear if the bankruptcy filing changes their leverage.

Less than two weeks ago, Minnesota dealer Paul Walser's profitable Buick Pontiac GMC store in Bloomington was targeted in the state's initial 30 closings. Monday, he said he is appealing that decision with GM. And while he notes Minnesota's franchise laws are strong, "a bankruptcy judge has broad-reaching powers, and they can say, 'I don't care about your state laws, this is the way it's going to be.' So we have a lot we have not figured out on this."

Walser does not expect dealerships whose contracts are not renewed to wait until the fall of 2010 to shut their doors. He suspects "these time frames are going to be substantially quickened." Some dealers targeted for closure will stay open selling other brands.

As for the state's manufacturing sector, its dependence on the auto industry has shrunk over the past 15 years as companies diversified, said Fred Zimmerman, a retired University of St. Thomas professor.

Fridley-based Kurt Manufacturing Co. gets about 3 to 4 percent of its annual revenue from General Motors, compared with about 8 percent a decade ago.

In its engineered products facility in Coon Rapids, Kurt makes inspection equipment for GM that can be used on parts such as pistons and brakes. Kurt also makes engine components for GM power trains at a plant in Pueblo, Colo.

"What level of business will continue forward?" said Steve Carlsen, Kurt Manufacturing's executive vice president. "We don't have anything definitive."

About half of the work done by 20 employees in Colorado is for GM, and Carlsen said the parts are shipped to GM's Romulus, Mich., engine facility that was not on the initial closure list of GM's plants.

About 50 people work for Kurt at its Coon Rapids plant, where 10 percent of the business comes from GM.

"It appears that they were paying parts suppliers early to minimize the bad debt writeoff that the supply base would have to take," he said.

Dave Fiedler, president of the Minnesota Precision Manufacturing Association, said few of his members supply parts to automakers. A few companies make molds used in vehicle manufacturing, but he said he's unaware of any Minnesota manufacturer that has a "great percentage" of its revenue tied to making auto parts.