* GM to terminate up to 2,000 U.S. dealers
* Chrysler to drop up to 1,000 U.S. dealers
* Notices could go out as early as Thursday
(Adds comments from dealers, Chrysler CEO letter, meetings in
By Soyoung Kim and John Crawley
DETROIT/WASHINGTON, May 13 General Motors Corp
(GM.N) 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
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 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.
The development comes as dealer representatives have
stepped up lobbying in Washington to try to slow down closures
they estimate would cost 200,000 dealership jobs.
The involuntary terminations are also widely expected to
prompt a legal challenge from dealers who are independent
retail networks protected by state franchise laws.
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.
More than 100 members from the National Automobile Dealers
Association, a group representing the country's 20,000 new car
dealers, met members of the House of Representatives and Senate
in Washington on Wednesday, asking them to intervene with the
Obama administration's autos task force on planned reductions.
"A rapid cut of dealers is a bad idea," NADA Chairman John
McEleney said in a statement.
McEleney said his organization does not oppose dealer
consolidation, but believes the administration and the
companies are moving too fast.
NADA leaders are scheduled to meet the U.S. auto task force
The task force, headed by former investment banker Steve
Rattner, is driving the restructuring of both companies, which
are planning to close plants, cut jobs and restructure dealer
lineups to establish viability.
PLANS BEING FINALIZED
GM, which is operating with $15.4 billion of U.S.
government loans, has to cut debt and operating costs and
present a new restructuring plan to officials by June 1 to
avoid a government-controlled bankruptcy.
Both GM and Chrysler have faced pressure to cut struggling
dealerships to bring their large sales networks line with those
run by more successful rivals led by Toyota Motor Corp
(7203.T). Toyota, No. 2 in U.S. sales behind GM, has about
1,200 dealerships in the country.
Chrysler is using the bankruptcy process to move faster
toward that goal, while GM plans to tell its dealerships they
are being dropped for not meeting standards for capitalization
GM wants to cut its dealer network to 3,605 from over 6,246
at the end of 2008. But it has not specified how it would
achieve that and how many dealerships would be involuntarily
terminated and how many it expected to go bankrupt or shut down
on their own.
Chrysler's plan has remained under wraps.
GM Chief Executive Friz Henderson said on Monday the
automaker was completing its plans for dealership consolidation
Chrysler Chief Executive Bob Nardelli said in a memo to
staff on Tuesday, a copy of which was obtained by Reuters, that
the automaker would determine how to organize its dealer
networks during the rest of the week.
Carroll Smith of Monument Chevrolet in Houston, one of the
100 new car dealers who lobbied lawmakers in Washington, warned
that a rapid wind down of outlets could lead to a flood of new
vehicles hitting the market simultaneously at much lower
prices, further undercutting hard-hit dealers.
"Dealers are not cost. What we are are retail and
distribution," Smith added.
(Additional reporting by Kevin Krolicki; Editing by Phil
Berlowitz and Andre Grenon)