General Motors Corp (GM) said on Friday it would drop about 1,600 US dealers as it struggles to slash billions of dollars in operating costs and debt ahead of an anticipated bankruptcy filing by the end of the month.
Taken together with a similar announcement by bankrupt Chrysler LLC a day earlier, over 2,300 US auto retailers have been put on notice that they are being eliminated by the two embattled automakers.
The unprecedented closures under the direction of the US President Barack Obama administration put an estimated 100,000 jobs at risk and showed the economic pain from the collapse of the two Detroit-based automakers spreading across the US.
“This is going to be a mess,” Atlanta-based dealer consultant Jim Ziegler said. “These dealerships are crucial to the local communities. Dealers are big advertisers. There will be a lot of ripple effects.”
GM said it planned to drop about 1,100 of its smaller and less profitable dealerships by letting their franchise agreements expire when they come due in October next year.
The automaker also expects to drop another 470 dealerships from cutting its Saab, Hummer and Saturn brands.
After other dealerships fold or merge in coming months, the plan is for GM to end up with about 3,600 showrooms by the end of next year for its Chevy, Cadillac, Buick and GMC brands.
That would represent a 40 percent reduction in GM’s far-flung dealership network that has been protected until now by a patchwork of state franchise laws that made automakers reluctant to move quickly to drop dealers.
GM is not offering dealers any compensation this time, but offered to help them wind down their operations. GM dealers targeted for closure were notified on Friday morning by letters sent overnight via Federal Express. Other GM dealers learned they had been spared when no letter arrived.
Meanwhile, the company continues to talk with its largest union, the United Auto Workers (UAW), about a deal to slash employee costs.
GM has said it expects to halve its remaining cash outlays for retiree health costs to about US$10 billion and supplement that with a 39 percent stake in the reorganized company.
Talks between the UAW and GM have intensified in recent days but remain stuck on the issue of whether the automaker should be allowed to cut 21,000 more US factory jobs even as it plans to sell more imported vehicles in the US market.
The union sees that as an unjustified use of US government assistance and on Friday renewed a call on the Obama administration and members of Congress to force GM to change its plans and spare jobs.
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