GM dealerships brace for closing news

When Friday ends, about 1,100 U.S. automotive dealers will be holding letters telling them that General Motors Corp. won???t renew their franchise agreements when they expire in 2010.

The Detroit-based manufacturer notified 1,100 dealers via letter that it planned not to renew their franchise agreements, which expire Oct. 31, 2010. The company declined to release the list of dealers notified.

Mark LaNeve, North American sales vice president, in a conference call, said the 1,100 dealers are the poorest performers among the almost 6,000 dealer footprint. The dealerships notified are 18 percent of the total network, but account for 7 percent of sales.

Content Continues Below

He said between 400 and 500 of the dealers notified sold fewer than 35 units per year, while the rest of the dealers did not meet the company???s performance standards, which are a calculation of several factors including sales, profitability and working capital compared to their peers.

The company plans to settle at between 3,600 and 4,000 dealerships. Another 500 dealerships will be cut when Hummer, Saab and Saturn brands are disposed of, while 35 stand-alone Pontiac dealerships will be eliminated as that brand is phased out by the end of 2010. Another 300 to 400 will be cut at a later date.

The dealer notifications are part of GM???s plan to cut its dealer network by 2,600 locations ??? 40 percent ??? by the end of 2010.

Chrysler LLC???s dealers learned on Thursday in special delivery letters which ones will survive and which ones won???t.

The automaker, which is operating under Chapter 11 bankruptcy protection, also released a full list of the 789 dealerships being closed.

More than a dozen D.C.-area dealerships were among those notified that they are being shut down by June 9. The closings amount to one fourth of Chrysler???s U.S. dealers.

GM expects to lose about 500 more dealerships through natural attrition this year.

The company has said that through April 275 dealerships will have closed as a combination of voluntarily termination and consolidations.

Five hundred to 600 other dealerships will be closed through consolidations and buy-sell negotiations.

The moves to shrink dealer networks underscores the economic pain caused by the downward spiral of General Motors and Chrysler, now operating under U.S. government oversight.