UPDATE 3-GM, Chrysler say dealer cuts inevitable
* GM to have 3,500-3,800 US dealers at end of 2010
* GM, Chrysler say smaller dealer network will cut costs
* Chrysler redistributes 97 pct of cars at idled dealers (Recasts first paragraph; adds further remarks from hearing)
By John Crawley and Mari Saito
WASHINGTON, June 3 (Reuters) - Angry U.S. senators pressed General Motors Corp GMGMQ.PK and Chrysler LLC on Wednesday to rethink their aggressive plans for closing more than 2,300 dealerships but top executives of the companies said that was not going to happen.
"In the end, they are going out of business," Senator Mike Johanns of Nebraska asked GM Chief Executive Fritz Henderson and Chrysler President Jim Press at the conclusion of a Commerce Committee hearing.
"Yes," Press said.
"Yes," Henderson followed.
The automakers have set aggressive deadlines to identify the showrooms they will retain after emerging from their bankruptcies with the help of $62 billion in federal bailouts.
Industry analysts have long said the sprawling retail networks hurt Detroit automakers because they force dealers -- particularly those in the suburbs of large cities -- to compete more against each other than rival automakers.
GM plans to cut nearly 1,600 dealerships over the next 18 months but wants showrooms moving ahead to sign up by June 12, an accelerated timetable one dealer called draconian and a "manipulation of the bankruptcy process."
Chrysler wants to reduce its network by 789 by June 9, the plan that drew the most attention from senators who said they have received emotional calls from constituents scrambling to understand why they are losing their businesses so quickly -- many of them family owned and entrenched in communities for years.
"Let me be very clear: I don't believe that companies should be allowed to take taxpayer funds for a bailout and then leave local dealers and their customers to fend for themselves with no real notice and no real help," said Commerce Committee Chairman John Rockefeller. "That is just plain wrong."
Press called decisions for swift termination of showroom franchises "gutwrenching" but "absolutely necessary" to facilitate his company's successful transition into an alliance with Italy's Fiat SpA (FIA.MI).
Pete Lopez, president and CEO of Spencer Auto Group in Spencer, West Virginia, said he has 48 vehicles split between GM and Chrysler models.
"There is no way you can wind down in 26 days, " he said of the time allotted by Chrysler last month.
Henderson said GM's restructuring "was the last chance to get it right" and said the company had to address the dealer overpopulation, a point he said was also raised by the Obama administration task force overseeing industry restructuring.
"We have no choice," Henderson said.
Chrysler plans to step out of bankruptcy within days while GM, which entered Chapter 11 on Monday, hopes to emerge within three months.
Lawmakers seemed to generally understand the need to cut costs but took strong issue with the rationale for dealer closures and the ambitious timetable for them to liquidate their inventory.
Maine Republican Olympia Snowe waved a dealership agreement at Henderson, saying the form was confusing and was a clear indication the process required more transparency and explanation.
"How is it that cutting four Chrysler dealerships and at least a dozen GM franchises in my state where over 50 percent of registered vehicles are bought from those two companies is going to help those companies to reemerge from bankruptcy and reestablish viability?" Snowe asked.
In a testy exchange, Alaska Democrat Mark Begich sought from Press a list of dealers to be closed only to be told there were no plans to release that information.
"They better be identified," Begich said, receiving support from Rockefeller.
GM wants to cut 1,100 of its smaller and least profitable dealerships and will lose another 470 by getting rid of its Saab, Saturn and Hummer brands.
Henderson estimated GM would operate between 3,500 to 3,800 U.S. dealers by the end of 2010. GM dealers, he said, would have a retail share of 17.3 percent in an industrywide annual U.S. sales market of more than 10 million vehicles.
Chrysler plans to have 2,392 dealers under Fiat. Press said the company was 97 percent complete in selling or redistributing vehicles from dealers set for closure.
The U.S. government would own 60.8 percent of GM and 8 percent of Chrysler on completion of their restructurings. (Editing by Gerald E. McCormick, Tim Dobbyn and Bernard Orr)
