GM shuts doors on

Company blames restrictive legislation

General Motors Corp. plans to quietly pull the plug on its GMDriverSite brick-and-click used-vehicle store, which the automaker launched in Texas last year.

After losing a protracted legal battle to operate a Web-based used-car business in Texas in July last year, Detroit-based GM licensed the rights to the online store and the Web front end to a local dealer in Houston. GM now plans to shut the Web site down, close the retail store and lay off the store's five employees.

Officials at the world's largest automaker said that the electronic store pilot offered valuable experience in how to operate a dot-com business but that restrictive laws prohibiting online vehicle sales by automakers accelerated the store's closing.

"The laws just aren't conducive to e-stores right now in Texas," said Roy Pikus, GM's brand director for Certified Used Vehicles. "We've learned all that we need to know about an e-store after one year of operation."

GM isn't the only automaker that has recently gone to court in Texas. In late July, Ford Motor Co. lost a legal fight to sell cars online to consumers in Texas. The U.S. District Court upheld a law barring automakers from selling vehicles "by mail, phone calls, leafleting, skywriting or drum signals."

Pikus said that ruling "hastened [GM's] departure out of Texas." But he added that GM "had not lost confidence in the concept" of an e-store.

The online store had both a Web front end at and a physical 4,000-square-foot shop in a local Houston strip mall. Consumers could search through an inventory of about 300 used vehicles and then schedule appointments to test-drive a vehicle at the mall. Sales averaged 30 vehicles per month.

GM had planned to operate the GMDriverSite store itself. But the automaker was denied a license to do that by the state of Texas. George DeMontrond, who owns several dealerships in Houston, then purchased and operated the store in conjunction with GM. DeMontrond couldn't be reached for comment.

GM has run into dead ends before when it has tried to circumvent dealers. Last summer, GM launched a poorly received plan to buy 770 dealerships and compete with its dealers in most U.S. markets.

Thilo Koslowski, an automotive analyst at Gartner Group Inc. in Stamford, Conn., said the loss of automaker-endorsed used-vehicle outlets such as GMDriverSite will ultimately hurt consumers.

"It saves time to give consumers access to huge inventories online," said Koslowski. "They don't have to go and physically visit each dealer."

Copyright © 2000 IDG Communications, Inc.

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