General Motors Corp. told its dealers Tuesday that it will force 1,000 to 1,200 underperforming locations to close their doors as the automaker tries to thin dealer ranks to make the remaining outlets more profitable.
GM told the dealers about the plan in a video conference, according to a dealer who spoke on condition of anonymity because the video conference was private. It is part of the company's plan announced Monday to cut more than 2,600 dealers by 2010.
The company expects to lose 500 Hummer and Saturn dealers when those brands close or are sold, and it expects 400 dealers to close voluntarily. Another 500 would be consolidated into other dealerships, according to the dealer.
GM said Monday that it also would eliminate its Pontiac brand, but there are only 27 dealers that sell just Pontiacs, according to the National Automobile Dealers Association. Most Pontiac dealers also sell Buick and GMC vehicles at the same location.
Company spokeswoman Susan Garontakos confirmed the numbers and said GM is in the process of deciding which dealers to keep based on their sales performance, capitalization, potential profitability, size, image and customer satisfaction scores.
After that, she said, the company will go market by market and determine which dealerships are not meeting the terms of their franchise agreements.
"There's a lot of things that we have to consider, but we'll have talks with those dealers that show or haven't demonstrated that they have maintained a good performance," Garontakos said.
John McEleney, chairman of the NADA, said in a written statement that GM must treat all of its dealers fairly and those that close should be compensated.
"It's not out of any fault of their own that these dealers are being forced to close their businesses," McEleney said.
He said many details were unknown about how the dealerships will be closed, but "137,330 dealership employees will lose their jobs, and state and local governments will lose an estimated $1.7 billion in sales tax revenue that would have been used for economic development in communities around the country."
GM announced Monday it plans to reduce dealerships by 42 percent from 2008 to 2010, cutting them from 6,246 to 3,605.
GM is living on $15.4 billion in government loans and faces a June 1 government deadline to complete restructuring moves, win concessions from its unions and cut its debt. If it fails to meet the deadline, it will go into Chapter 11 bankruptcy protection.
GM has decided to scrap its Pontiac brand and either sell or close Hummer, Saturn and Saab. It will focus on four core brands: Chevrolet, Cadillac, GMC and Buick.