Dealership rationalization was something General Motors was looking at well before the economy went pear-shaped. GM still has more than 6,300 dealerships in the U.S., and it is even more important now to start shedding some of that financial burden. That is why The General told dealers at the NADA conference that it plans to get rid of 1,600 dealerships by 2012.

GM's initial viability plan to Congress proposed an eventual reduction to 4,000 dealerships. No one knows yet, though, how GM plans to do that. GM said it will explain the dealer elimination plan in the follow-up viability plan it submits to Congress on February 17. Said one GM dealer, "They basically said, 'We're looking for strong dealers, and if you're not a strong dealer, you better evaluate your options."

GM did say that 400 dealers per year being shut isn't a firm number, simply a target. Nevertheless, dealers are none too happy. Some dealers say GM is using GMAC to force dealers out by setting capital requirements beyond a dealer's reach. GM says it has no intention of using GMAC in such a way. When the time comes, dealership liquidation will be be judged market by market, and based on a number of factors including age, location, volume, capitalization and customer satisfaction. While the plan will obviously save GM money in the long term and make it more efficient, in the short term it is going to cost GM a fortune to close 1,600 locations.

[Source: Automotive News, sub req'd, Photo by Justin Sullivan/Getty]