Friday, May 15, 2009

American automobile manufacturer General Motors (GM) announced plans Friday to shut down about 1,100 of its dealerships, in an effort to evade bankruptcy and lower its expenditures.

GM’s move comes a day after Chrysler, another U.S. car maker, released a list of 789 dealerships that it was closing. Unlike Chrylser, GM will not publicly announce the dealerships that it intends to shut down. Instead, dealerships whose franchises won’t be renewed after October of next year will receive a private letter telling them of the decision.

At the moment, GM has 6,246 dealers in the U.S. It intends to reduce that number to 3,605 by the end of 2010. GM said the dealerships that were to be closed are “underperforming and very small sales volume U.S. dealers.”

“They’re dealerships that are in most cases hurting, losing money, and in danger of going out of business anyway,” said GM’s sales, service, and marketing vice president in a telephone conference. “It’s a move that people could argue should have been taken years ago but this leadership team had no choice but to do it today.”

The dealers that are to be closed represent 18% of the firm’s dealership network, but only 7% of GM’s 2008 revenue.