GM Follows Chrysler In Announcing Dealer Closings

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Stanley Balzekas (right), 85, and his son Stanley Balzekas III stand Thursday in the showroom of their Balzekas Chrysler dealership in Chicago. In business since 1919, it is one of 789 Chrysler dealerships nationwide that will lose their franchise under the automaker's restructuring plan.

Scott Olson/Getty Images

Stanley Balzekas (right), 85, and his son Stanley Balzekas III stand Thursday in the showroom of their Balzekas Chrysler dealership in Chicago. In business since 1919, it is one of 789 Chrysler dealerships nationwide that will lose their franchise under the automaker's restructuring plan.

A Look At America's Automakers

General Motors Corp. announced Friday that it will slash dealerships by nearly 20 percent, closing some 1,100 sales outlets as the troubled automaker faces a government-imposed deadline for restructuring. The move comes a day after rival Chrysler announced its own plans to close hundreds of dealerships.

On Thursday, Chrysler LLC said it would drop 789, or 25 percent, of its roughly 3,200 dealerships by June 9. The dramatic scaling back in the retail arms of the two companies is the latest sign that the once-proud American automobile industry is fighting for its life amid the deepest recession in decades.

"... it is imperative that a healthy, viable GM have a healthy, viable dealer body that cannot only survive but prosper during cyclical downturns," Mark LaNeve, GM vice president of sales, service and marketing, said in a statement. "Long term, GM should have fewer, healthier dealers, maintaining GM's current high customer satisfaction ratings, with more sales per outlet."

In a conference call with reporters, LaNeve called cutting the dealers from GM's network "a just move that perhaps people could argue should have been taken years ago."

"But, certainly this leadership team has no choice but to take it now," he added.

GM said about 40 percent of its dealers will not have their sales and service contracts renewed when they expire in late 2010. He said another 500 dealers who sell Saturn, Saab and Hummer vehicles will get a status update on those divisions in the next week or so. GM is looking into either selling or eliminating the lines.

The Treasury Department said in a statement on Friday that it would stand behind GM during the

remainder of its restructuring and that the government's task force continues to work with the automaker and "all its shareholders."

The cuts at GM are likely to have a bigger impact at individual dealerships than those announced by Chrysler, which went into Chapter 11 bankruptcy last month. Many Chrysler dealers sell other brands and may be able to stay in business, while the bulk of GM's dealers sell only GM vehicles.

The National Automobile Dealers Association says about 40,000 people work at the affected Chrysler dealerships. Many will keep their jobs, but their dealerships will be left to sell only the other brands in their showrooms or used cars.

Even so, the news hit hard at dealers such as Great Northern Dodge near Cleveland, among those that got the bad news from corporate Thursday.

"We've been with them 30 years, and we thought we'd done a good job with them as far as selling cars, parts, service, body shop, and we never had any indication that anything was going to change," owner Ed Schartman told NPR.

Schartman, like other Chrysler dealers, buys new cars from the factory, often with loans from local banks. Now, with the automaker in bankruptcy, the dealers are stuck with selling what's left on their lots.

"As far as [Chrysler is] … concerned, I own everything, they own nothing. So, I'm on the hook for whatever is out there," he said.

Chrysler executives said Thursday that the company is targeting its weakest dealerships, with more than half of those eliminated selling fewer than 100 vehicles a year.

Chrysler has received $4 billion in government aid, while GM has taken $15.4 billion. As a condition for the bailout money, the two manufacturers agreed to present a restructuring plan to the government by June 1. Chrysler's bankruptcy effectively fulfills the restructuring deadline. Many experts expect GM to follow its rival into Chapter 11.

Some dealers have vowed to fight their termination. Joe Lawlor, sales manager at Westminster Dodge in Boston, told NPR his franchise would appeal.

"We're not going to go down without a fight," he said.

A hearing is scheduled for June 3 in U.S. Bankruptcy Court in New York for the judge to determine whether to approve Chrysler's motion to fire its dealers.

From NPR staff and wire reports