GM dealers expect word on plans to cut 1,100 shops

DETROIT -- A day after Chrysler told a quarter of its dealers that it won't renew their contracts, owners of General Motors dealerships are awaiting word on whether they will be next.

The cuts will come just a day after crosstown rival Chrysler announced it wants to drop 789 of its 3,200 dealerships by about June 9. Both companies have too many dealerships for too few sales are slashing costs as they race to restructure.

The GM dealer cuts are likely to have a much greater impact than Chrysler's. While many Chrysler dealers sell other brands and will stay open after losing their Chrysler franchises, a large number of GM dealers sell only GM vehicles. So if their franchises are revoked, they run a greater risk of closing for good.

In both cases, the cuts will cost thousands of jobs, create holes in local tax bases, eliminate community pillars and create economic ripple effects across the country.

Chrysler is operating under bankruptcy protection, so it is likely to have an easier time tearing up its franchise agreements with its dealers than GM. 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.

Chrysler executives said Thursday that the company is trying to preserve its best-performing dealers and eliminate ones with the weakest sales. More than half of the dealerships being eliminated sell fewer than 100 vehicles a year, they said, and account for 14% of U.S. sales.

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.