By KATE BRUMBACK | Associated Press Writer
5:20 AM EDT, September 25, 2008

COLUMBUS, Ga. - Bill Heard Enterprises Inc., the biggest Chevrolet dealer in the country, said Wednesday it is closing its 13 remaining dealerships, unable to survive in a weak economy with high gas prices and an inventory heavy on trucks and SUVs.

The Columbus-based company said in a statement it tried to avoid the closures, which will affect about 2,700 employees.

“However, the conditions necessary to sustain the business through the current challenges were not present,” the statement said.

The difficult sales environment was made worse by the ongoing banking and financial crisis, it said. GMAC Financial Services last month discontinued credit for new inventory for some of the company’s dealerships.

Phone calls to several Bill Heard dealerships Wednesday afternoon went unanswered.

One employee at a Bill Heard dealership in Memphis, Tenn., said, “We’re closing, that’s all I can tell you,” before abruptly hanging up. At another Bill Heard dealership, commotion could be heard in the background as an employee said managers would not come to the phone.

The Heard operation was the single largest chain of Chevrolet dealerships in the country, said GM spokeswoman Susan Garontakos.

GM will honor all Chevrolet warranties at other nearby dealerships, which can be found on the Chevrolet Web site, she said.

She would not comment on reasons for the chain closing other than to say it was an independent business with GM franchise agreements.

“GM dealers are responsible for managing and financing dealerships,” she said.

GM will work with the Heard chain and do research to decide if any of the dealers will reopen, she said.

The automaker is trying to reduce its dealership ranks as its U.S. market share has declined, and Garontakos said the closure opens an opportunity to look into whether any of the Heard outlets can be consolidated into nearby dealerships.

“Wherever it makes sense to keep a point open, and it’s attractive enough for other dealers to take a look at it and keep it operating, we’ll be doing that,” she said.

The company had five dealerships in Georgia and eight in five other states — Alabama, Florida, Nevada, Tennessee and Texas. A dealership in Scottsdale, Ariz. closed on Sept. 12.

Late last month, the Governor’s Office of Consumer Affairs said in a court filing in Georgia’s Fulton County that the company has participated in deceptive and misleading business practices. The company denied those allegations.

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DETROIT -(Dow Jones)- Building small cars in the U.S. has generally been a money-losing venture for General Motors Corp. (GM)

But now the auto maker believes it has found the formula to turn a profit on compact cars, even if those cars are built by union labor in a traditional Rust Belt town.

GM on Thursday will announce a major investment in its Lordstown, Ohio, assembly plant designed to ready the factory for a next-generation compact car: the Chevrolet Cruze.

Mired in red ink and faced with sinking sales of profitable pickup trucks and sport-utility vehicles amid high fuel prices, the auto maker can no long afford to concede losses on small cars.

“Small cars are becoming a permanent feature of the U.S. market, and the odds of earning a decent return have gone up” for domestic auto makers, said auto analyst John Casesa, managing partner of Casesa Shapiro Group. “The window of opportunity for GM is now.”

The Cruze will be built on a single platform around the world, leveraging economies of scale.

Meantime, factory workers building the car will be working under a new labor deal that was inked last year with United Auto Workers and is expected to save GM roughly $5 billion a year in wages and benefits. The Ann Arbor-based Center for Automotive Research estimates the new contract will cut GM’s average cost of building a car or truck by $4,000 to $5,000 per vehicle by creating a second tier of lower-paid factory workers and offloading retiree medical benefits to the union.

GM is counting on one more critical - but still uncertain - element to turn small cars into money makers, which is that consumers will ante up thousands of dollars more for a new small Chevy.

The auto maker believes growing demand for nicer, well-equipped small cars coupled with a dramatic redesign for the Cruze will be enough to command sticker prices well beyond the $15,000 base price of a compact Chevrolet Cobalt.

GM’s cars typically sell for less than $20,000, or about half the price of many trucks and SUVs. While the bigger vehicles cost more to develop and build, profit margins on trucks are still far bigger than on cars.

GM is likely losing hundreds of dollars on each compact Chevrolet Cobalt it sells in the U.S., while the auto maker’s trucks deliver thousands of dollars in net profits, said David Cole, chairman of the Center for Automotive Research.

Deep production cuts also will help the auto maker run its factories at full capacity, further eliminating waste, he said.

“What they are enabling is a business model they have not had in years,” he said. “They’re going to be profitable across their entire product line.”

“This car will represent the first U.S. application of our global architecture strategy,” GM Chief Executive Rick Wagoner said of the Cruze in June, when he laid out a plan to build fewer trucks and ramp up production of small and midsize cars. “This strategy will pay major dividends as we leverage our extensive car product development capability in Europe, Korea, and other locations to accelerate the shift in our U.S. product portfolio.”

Ford Motor Co. (F) is attempting the same global platform approach with the introduction of its new subcompact Ford Fiesta vehicles, due to hit the U.S. in 2010. The Fiesta is already on sale in Europe.

Americans stunned by record gas prices have begun clamoring for fuel-efficient small cars, and major auto makers are struggling to meet demand.

Small car sales were up 11% through July, while overall U.S. auto sales were down 11%. GM is adding a third shift at the Lordstown factory to meet demand for the Cobalt, which is currently built there. Ford, Toyota Motor Corp.(TM) and Honda Motor Co. (HMC) also are scrambling to meet soaring demand for cars like the Ford Focus, Honda Civic and Toyota Corolla.

“The small car was never aspirational until three months ago, and with that change comes that opportunity to potentially make money on small cars,” said analyst Rebecca Lindland of Global Insight Inc.

To succeed, she said, GM must fight the perception that its cars are subpar compared to offerings from Toyota and Honda.

“They continue to suffer from the perception that they don’t make a quality vehicle,” she said.

- By Sharon Terlep, Dow Jones Newswires; 248-204-5532; sharon.terlep@dowjones.com.

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August 20, 2008 18:37 ET (22:37 GMT)

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