GM terminating about 1,100 dealer franchises

Associated Press - May 15, 2009 12:13 PM ET

NEW YORK (AP) - GM says it's notifying 1,100 "underperforming" dealers that it plans to drop them, as the automaker works to nudge itself back into the black.

FedEx letters bearing the bad news began arriving today, saying dealers were judged on sales, customer service scores, and the location and condition of facilities.

But, the letters say the decision isn't finalized, giving dealers to the end of the month to submit information that may change the automaker's mind.

One GM executive says dealers are an asset, but too many dealers "are a problem."

The cuts are part of the automaker's plans to lose about 40% of its 6,200 dealerships. They come on the heels of Chrysler's announcement that it's shedding 800 dealerships.

GM also plans to provide updates to about 470 Saturn, Hummer and Saab dealerships on the status of those brands, which it plans to sell. It says it expects some dealers will shut themselves down.

Auto dealers have always been a major source of charitable contributions for their local communities.

Now, with Chrysler and GM closing nearly 2,000 dealerships by late next year, many communities will lose key sources of charitable funding.

Dealers sponsor everything from Little League teams to libraries, rodeos to road races. In return, car dealers get their names printed on jerseys, programs and signs, and customers are often happy to repay that generosity when it comes time to buy new vehicles.

One terminated Chrysler dealer says, "You try to stay involved and support the community and keep your name out there also."

Charities across the country are bracing for reduced help not just from the dealerships but also from their laid-off employees.

Smaller towns will expecially feel the pinch, because there are few other businesses to turn to for donations.

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