GM, Chrysler say dealer cuts key part of revival

WASHINGTON (Reuters) - Top executives of General Motors Corp and Chrysler LLC were pressed by angry U.S. senators on Wednesday to rethink plans to slash more than 2,300 dealerships as a key part of their restructuring.

Industry analysts have long said that 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.

The automakers have set aggressive deadlines to identify the showrooms they will retain after emerging from bankruptcy with the help of billions of dollars of taxpayer funds.

“We have no choice. We’re all being called to sacrifice in order to build a strong, more viable GM,” Chief Executive Fritz Henderson told a Senate Commerce Committee hearing. “This is our last chance to get it right.”

Chrysler President Jim Press called decisions for terminating showroom franchise agreements “gutwrenching” but “absolutely necessary” to facilitate his company’s successful transition into an alliance with Italy’s Fiat SpA.

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GM plans to cut nearly 1,600 dealerships over the next 18 months but wants showrooms moving ahead to sign on with them by June 12. Chrysler wants to reduce its network by 789 showrooms by June 9.

But the loss of dealerships and an estimated 100,000 jobs linked to them drew angry responses from senators at the hearing.

“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. That is just plain wrong,” said Commerce Committee Chairman John Rockefeller.

In one tense exchange, Alaska Democrat Mark Begich was initially rebuffed when he asked Press for a list of dealers scheduled for closure.

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“They better be identified,” Begich said.

Federal bailouts already extended and promised for GM and Chrysler total more than $62 billion, fueling further lawmaker contempt.

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. The company expects those dealerships slated for closure to agree to wind down their operations in an orderly fashion over the next 18 months.

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 industry-wide annual U.S. sales market of more than 10 million vehicles.

Chrysler, which is close to stepping out of bankruptcy court protection, plans to have 2,392 dealers.

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 and Tim Dobbyn