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Latest GM restructuring plan eliminates 42% of dealers by 2010

November 15, 2010

The federal government and a United Auto Workers health care trust would own 89 percent of General Motors stock, with the government holding more than a 50 percent stake, under a massive restructuring plan laid out April 27 by the automaker.

The plan also would phase out the Pontiac brand by the end of 2010, cut 21,000 factory jobs by next year, and purge GM’s dealership ranks by 42 percent from 2008 to 2010, cutting them from 6,246 to 3,605.

GM will start May 11 to notify the dealerships it plans to eliminate, the company told dealers Tuesday.

In a videoconference with dealers, GM officials said 1,000 to 1,200 underperforming dealers will be reviewed for closure, and the company plans to cut 450 stores with the elimination of Saturn, Hummer and Saab brands, said GM spokeswoman Susan Garontakos. She also expects attrition and consolidation to force additional closures.

Mark LaNeve, vice president of North American sales and marketing, said GM is considering a dealership’s sales, customer satisfaction scores, amount of working capital, facility standards rating and whether the dealership is dualed with an unapproved brand.

The latest plan lowers GM’s break-even point in North America to an annual U.S. sales volume of 10 million vehicles. That slightly exceeds the current sales rate, but most economists expect an uptick later this year.

"This lower break-even point better positions GM to generate positive cash flow and earn an adequate return on capital over the course of a normal business cycle, a requirement set forth by the U.S. Treasury," GM said in a statement.