DETROIT – A day after Chrysler LLC said it was cutting 800 dealerships, General Motors Corp. on Friday told about 1,100 of its U.S. dealers their franchises will be terminated late next year.

GM said the move targets “underperforming” dealers with small sales volumes and markets in which they are not competitive.

“Dealers are not a problem to GM; they’re an asset to GM. Too many dealers, in actuality, are a problem,” said Mark LaNeve, GM’s vice president of North American sales and marketing, in a conference call with reporters.

The company did not disclose the dealers it plans to eliminate and left it up to dealerships to reveal if their franchises will not be renewed.

The cuts are part of a larger GM plan to drop 2,600 of its 6,200 dealerships as the automaker tries to restructure to become profitable again. The moves likely will cause the loss of thousands of jobs and governments will lose untold dollars in tax revenue as dealerships are forced to close.

Besides the 1,100 dealership cuts, the company will provide updates to about 470 Saturn, Hummer and Saab dealerships on the status of those brands, which it plans to sell.

Friday’s cuts will not be the last. GM said it expects to lose more dealers through attrition. Ultimately, about 90 percent of the remaining dealerships will stay with GM, the company said.

FedEx letters bearing the bad news began arriving Friday morning at GM dealers around the U.S. The letters state that dealers were judged on sales, customer service scores, location, condition of facilities and other criteria.

Both Chrysler and GM say they are cutting the number of dealers because they have too many outlets that are too close to each other, and the competition drives down prices. But as the ranks of dealers thin and competition decreases, that likely will mean higher prices for car and truck buyers.

As GM and Chrysler lost market share to Japanese and other overseas brands, the automakers, as well as Ford Motor Co., ended up with too many dealerships. Many are barely getting by and can’t afford to upgrade their facilities or hire the best personnel to compete with the Japanese, who have far fewer dealerships.

With fewer dealers, consumers won’t see as much competition, said Aaron Bragman, an automotive industry analyst with the consulting firm IHS Global Insight.

Source: AP