GM seeks to cut off 38 dealers that rejected 'wind-down' offer

— -- General Motors, which has been trying to shrink a dealer network it says it has been spending more than $2 billion a year to subsidize, has asked for bankruptcy-court approval to cut off contracts with 38 dealers who refused its offer to "wind down" their businesses with GM's help.

Unlike Chrysler, which trimmed its dealer network in bankruptcy court by rejecting franchise agreements, GM had sought to cut its 6,000-store network primarily through "wind-down" deals.

About 4,100 have been offered revised deals and signed to continue with GM.

Most of the remainder accepted deals to wind down. Only 38 dealers rejected the options, the company told the U.S. Bankruptcy Court.

"The affected dealers elected not to accept the debtors' wind-down agreement, thereby leaving the debtors with no choice but to seek to reject the affected dealer agreements," GM said in its filing.

GM is trying to restructure itself by selling off its good assets to create a "New GM" through the bankruptcy process. The U.S. Treasury will have a 60% stake in New GM in exchange for its $50 billion in financing. Bankruptcy Judge Robert Gerber has approved the plan but has given opponents until Thursday to object. Two groups so far are appealing.

The company said in court records that all dealers not offered a place with New GM were offered deals for up to 16 months to wind down the business and sell existing inventory. They would also get a one-time cash payment.

Dealerships being wound down cannot order new vehicles but can continue to order parts and perform warranty and other services.

GM said low sales and only marginal networkwide profitability forced it to spend more than $2 billion annually on dealer-related subsidies. In addition, the company said it spends "hundreds of millions of dollars per year on structural costs" related to the dealer network, including local advertising assistance, dealer training and websites.

In 1980, GM commanded a 45% share of the U.S. market. That fell to 22% in 2008 and is expected to dip as low as 19.5% this year under the automaker's restructuring plan.