The Auto Writer

Thousands of General Motors dealers have been wondering if they were to be among the group of dealerships to be terminated by the automaker, with 1124 receiving confirmation from GM today that they were getting the ax. FEDEX and U.S. Mail notices were sent out to each of the affected dealers who learned that their franchise agreements wouldn’t be extended beyond October 2010.

This news follows on the heels of yesterday’s announcement by Chrysler that 789 Chrysler, Dodge and Jeep dealerships would be shuttered. Unlike Chrysler, which plans to have most of these dealerships closed out by June 9th, GM is giving their dealers nearly eighteen months to wind down operations. They can also appeal the automaker’s decision.

Automotive News reported that GM’s Mark LaNeve, who is North American sales vice president, said that the impacted dealers only accounted for 7% of the automaker’s sales totals in 2008 and currently hold just 8% of the company’s unsold inventory.

An Immediate Wind Down Of Operations Expected

Though an appeals process is available LaNeve indicated that only if a mistake was made, one based on bad data, they aren’t anticipating that many of these decisions will be reversed. In addition, GM wants these dealerships to begin winding down their operations by selling off their current inventory.

LaNeve expects that some of the 65,000 vehicles sitting on the lots of affected dealers may end up being taken back. However, he stressed that the automaker wants as much inventory sold as possible to avoid holding costly auctions.

Saab, Saturn and Hummer Spared…For Now

GM’s move doesn’t include 470 Saab, Saturn and Hummer dealerships who will also lose their franchises unless a buyer steps forth for one or more of those brands. In addition, GM identified 35 Pontiac-only dealerships who are also getting the ax, franchises who aren’t fortunate to be part of the current Buick-Pontiac-GMC sales channel and are poor performers. GM had said earlier this month that they would shut down Pontiac by the end of 2010.

Once the smoke clears, there will still be 4300 dealerships remaining who will then have to compete for the 3600 dealership slots GM says will be adequate to sell its product line going forward.

Decision Day Looms

June 1st looms as an important day for GM as that date is when the automaker must convince the Obama administration that they have the tools in place to reorganize. If not, President Obama can order GM to declare bankruptcy, a move that current GM CEO Fritz Henderson says looks “probable.”