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Latest update : 2009-05-15

US auto industry leader General Motors will cut nearly 40 percent of its US dealers by the end of 2010, a process started on Friday with a cut of around 1,100 "underperforming" outlets.

AFP - Troubled auto giant General Motors said Friday it will seek to eliminate nearly 40 percent of its US dealers, more than 2,300 sales outlets, by the end of 2010 as part of its reorganization.

GM said in a statement that "this process starts today," with the notification of some 1,100 "underperforming and very small sales volume US dealers" that "will be advised that GM does not see them as part of its dealer network on a long-term basis."

In most cases, franchise agreements run through October 2010.

Additionally, GM said it would also likely sever ties with about 470 Saturn, Hummer and Saab dealers as it sheds those brands.

The company, which is struggling to come up with a viability plan to avert bankruptcy, said additional cuts from attrition and other changes would reduce its dealer network from the current level of 5,969 to roughly 3,600 by the end of 2010.

"We have said from the beginning that our dealers are not a problem but an asset for General Motors," said Mark LaNeve, GM vice president.

"However it is imperative that a healthy, viable GM have a healthy, viable dealer body that can not only survive but prosper during cyclical downturns. It is obvious that almost all parts of GM, including the dealer body, must get smaller and more efficient."

Debt-ridden GM has taken more than 15 billion dollars in government loans and faces a June 1 deadline to complete a major restructuring plan or be forced to follow its rival Chrysler into bankruptcy court.

The announcement came one day after Chrysler asked a bankruptcy court judge to shut down 789 dealers, nearly one-fourth of its sales outlets, saying this will cut costs and boost the odds for the success of its alliance with Italy's Fiat.

Chrysler, which is aiming for a quick court restructuring to start fresh under a partnership with Fiat, said the large dealer network compared with its rivals "substantially increases expenses and inefficiencies in the distribution system."

Date created : 2009-05-15