GM and Chrysler To Cut 3000 U.S. Dealers

DETROIT May 13, 2009; Soyoung Kim and John Crawley writing for Reuters reported that General Motors Corp and Chrysler aim to drop as many as 3,000 U.S. dealers and are expected to begin sending notifications as early as Thursday, three people briefed on the still developing plans said.

GM, facing a U.S. government-imposed deadline of June 1 to restructure or file for bankruptcy, is expected to send termination notices to up to 2,000 dealers -- a third of its roughly 6,000 U.S. dealers, the sources told Reuters.

Chrysler, which filed for bankruptcy on April 30, will also tell up to 1,000 of its 3,189 U.S. dealers that it is terminating their franchise agreements, according to the sources who asked not to be identified because the controversial closure plans have not been yet announced.

The moves to shut down auto dealerships underscores how the economic pain caused by the downward spiral of both automakers -- now operating under U.S. government oversight -- is spreading beyond their home base in Detroit.

Chrysler spokeswoman Kathy Graham said the automaker had not announced its dealership closure plans.

"We have not announced anything at this point," she said. "We are not done with our process at this point."

A GM spokesman was not immediately available for comment.

Editing for Reuters by Phil Berlowitz