GM sends pink slip to 1,100 dealers

With just two weeks to go for the 1 June deadline imposed by the US government to restructure or file for bankruptcy, General Motors dealt a telling blow to 1,100 of its nearly 6,000 dealers yesterday by saying that it did not intend to renew their franchise agreements late next year.

In a desperate move to avoid bankruptcy, the Detroit-based carmaker plans to reduce its dealer network 40 per cent from nearly 6,000 to 3,600 and close down some 2,300 sales outlets by the end of 2010.

This move came just a day after its smaller sibling in distress, Chrysler, asked a bankruptcy court judge to close its 789 US dealers by 9 June in order to make its deal with Fiat more lucrative.

GM told the 1,100 dealers across the country that based on their sales, customer service scores, location and other factors, the company would not renew the dealership.

In pruning down the number of dealers, GM will be able to reduce costs incurred in transportation of cars and parts to various locations as well reduce inventory.

The National Automobile Dealers Association said that by closing down 1,100 of GM dealerships, 63,000 jobs would be lost by June.