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GM eliminating 1,600 dealer franchises

GENERAL Motors Corp plans to drop about 1,600 United States dealers as it struggles to slash billions of dollars in operating costs and debt ahead of an anticipated bankruptcy filing by the end of this month.

Taken together with a similar announcement by bankrupt Chrysler LLC a day earlier, more than 2,300 US auto retailers have been put on notice that they are being eliminated by the two embattled auto makers.

The unprecedented closures, taken under the oversight of the Obama administration's autos task force, put more than 100,000 jobs at risk across the US and show the spreading economic pain from the collapse of the two Detroit-based auto makers.

GM confirmed it planned to eliminate about 1,100 dealerships on the grounds that they are less profitable and weakly capitalized, by letting their franchise agreements expire between now and the end of next year.

The auto maker expects to drop another 470 dealerships from cutting its Saab, Hummer and Saturn brands, said GM spokesman John McDonald. After merging remaining dealerships, the plan is for GM to cut about 2,600 showrooms, or 40 percent of its US retail network.

"We are telling them basically that you are not going to fit into the picture long term, but between now and then we will help wind the business down the best way individually with each dealer," GM spokesman John McDonald said.

GM dealers affected by the closure plans received letters by express mail yesterday morning informing them that the auto maker did not see how it could have a "productive business relationship" after next year.

Other GM retailers who did not receive the express mail learned that they had been spared.

"It's kind of like 'Dancing with the Stars,' " said Richard Genthe, a Chevrolet dealer in Southgate, Michigan. "You're safe. You get to go ahead into next week."

The elimination of US dealerships and the jobs that go with them was an anticipated, but painful, part of the US auto industry shake-up following the collapse in US auto sales.


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