GM to close 1,100 dealerships

Some 1,100 U.S. dealers got letters Friday telling them that General Motors Corp. won???t renew their franchise agreements when they expire in 2010.

Among those are a Cartersville, Ga., Chevrolet dealership, according to Atlanta Business Chronicle broadcast partner WXIA-TV11Alive. Chuck Clancy Chevrolet received notice it will lose its franchise late next year.

The letters outline the dealership???s deficiencies and detail how it failed to meet the requirements of GM???s sales and service agreements.

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Duluth, Ga.-based-based Asbury Automotive Group Inc. (NYSE: ABG) said GM will not renew the franchise agreements for two Asbury dealerships in Kissimmee, Fla.-- a Chevrolet franchise and a combined Pontiac/Buick/GMC store.

Asbury on Thursday learned Chrysler will shut down its Nalley Chrysler/Jeep dealership in Roswell, Ga.

"We are disappointed that the Nalley dealership will be closing and the Kissimmee stores will be phased out, and our hearts go out to the affected employees," said Charles R. Oglesby, Asbury president and CEO, in a statement. "At the same time, we understand that consolidation of their dealer networks is a critical component of Chrysler and GM's restructuring programs, and that it's important for all parties to bear some part of the burden. We will do whatever we can to support the manufacturers through this difficult period."

Oglesby added that the closing of its dealerships will not have a material impact on its ongoing revenues, earnings or financial position.

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.

The Detroit-based carmaker 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.

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.

Fourteen in Georgia, including five in metro Atlanta, were among the those notifiedthat they are being shut down by June 9. The closings amount to one fourth of Chrysler???s U.S. dealers.

???We have said from the beginning that our dealers are not a problem, but an asset for General Motors,??? said Mark LaNeve, GM vice president of sales service and marketing, in a statement to the media. ???However it is imperative that a healthy, viable GM have a healthy, viable dealer body that cannot only survive but prosper during cyclical downturns. It is obvious that almost all parts of GM, including the dealer body, must get smaller and more efficient.???

Besides the 1,100 underperformers that GM will cut, another 500 dealerships will depart when GM sells the Hummer, Saab and Saturn brands. General Motors also has 35 stand-alone Pontiac dealerships that will go away when it phases out Pontiac by year-end 2010.

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. Up 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.

LaNeve said General Motors plans differ from Chrysler because it allows the eliminated dealers to wind-down their businesses over several months. By allowing agreements to expire, rather than terminating agreements, the company does not have to buy back inventory because of the floorplan financing agreements throughGMAC LLC. General Motors also would be required to buy back inventory if dealerships opt to terminate agreements,

LaNeve said they hope most will choose to wind-down business. The eliminated dealers have approximately 65,000 vehicles.