Lithia wins appeal, will keep Cedar Rapids GM franchises

Metro Cedar Rapids' only Buick, GMC and Cadillac dealer has won an appeal of a General Motors decision last year not to extend its franchise.

The ruling in an arbitration proceeding means Litihia Motors can begin hiring more staff and restocking its depleted inventory  at Buick GMC Cadillac of North Cedar Rapids at Interstate 380 and Boyson Road in Hiawatha, General Manager Steve Fox said.

“We are going to be continuing on as a Buick-GMC-Cadillac dealership,” Fox said. “We have started to acquire some inventory. The new cars are coming in, and the future is great.”

Fox said the dealership had to reduce staffing levels when it wasn't allowed to order new cars from General Motors last year because of its franchise status. He said the company is gradually getting new shipments of cars, but can't get all the vehicles it would like immediately because GM's factories aren't producing quickly enough to meet demand.

Buick GMC Cadillac of North Cedar Rapids expects to add several positions in the coming months, Fox said, mainly sales personnel and service technicians.

Fox said the franchise uncertainty had only affected the dealership's ability to order new cars, and had continued to perform service and sell used vehicles. The dealership's corporate owner, Lithia Motors, is a publicly traded chain of 85 car dealers based in Medford, Ore.

Lithia announced in late April that it had reclassified two stores from discontinued operations to continuing operations. It said it no longer has any dealership closing planned, and is ready to resume acquiring dealerships.

Lithia reported a first-quarter profit of nine cents per share compared to a loss of one cent per share in the first quarter of 2009. New car sales at dealerships open for at least a year were up 11.5 percent.

Fox said Lithia learned of the franchise reinstatement decision last month, but could not formally announce the decision until some “paperwork with GM” was completed.

Lithia closed its Saturn store at the Hiawatha dealership in May 2009, moving its Kia dealership into the former Saturn location.  Due to stronger Kia sales, the Hiawatha dealership sold more new vehicles in the first quarter of 2010 than the first quarter of 2009, Fox said. The dealership also sold more used vehicles.

Lithia closed its L2 Motors used car dealership in Hiawatha in 2008 and sold the property.

Lithia arrived in the Corridor market in 2006 when it purchased the former Allen Motor Co. dealership in Hiawatha.

GM announced plans in May 2009 not to renew over 1,000 franchises as part of a plan to reduce its dealer network from 6,200 to about 3,600.

The decisions about which dealerships not to renew were said to be based on fundamental business reasons such as working capital, sales, and customer satisfaction. GM never disclosed which dealerships were targeted or the individual reasons given for each dealership.

GM later bowed to public and political pressure by creating an arbitration system for dealerships to dispute the company's franchise non-renewal decisions.

Stephen Motors in Monticello has also won reinstatement from GM through the arbitration process.