Chrysler, GM cutting dealerships

AUBURN HILLS, Mich., May 14 (UPI) -- U.S. automaker Chrysler planned to cut nearly 800 dealerships Thursday to become a leaner and more profitable company, a court filing said.

The plan, filed in bankruptcy court in New York, called for closing 789 of 3,200 outlets. Eventually, "overall sales in the reduced network are anticipated to grow beyond current sales levels," the filing said, CNNMoney.com reported.

General Motors Corp. also had plans to send notices to dealerships this week, aiming to cut about 2,000 of its 6,000 outlets, BusinessWeek reported.

The extensive array of showrooms across the country were developed while U.S. automakers commanded about 90 percent of the U.S. market. But that share has dropped to 45 percent to 50 percent in recent years, BusinessWeek said.

Auto dealers said extraneous outlets should close through natural market forces.

John McElenery, chairman of the National Automobile Association, said, "A rapid cut of dealers is a bad idea."

The cuts would "result in another 200,000 Americans losing their jobs," he said.

In a statement, the Treasury Department said the cutbacks "are necessary for this company and the industry to succeed."

With liquidation, Chrysler would have been left without a single dealership, the Treasury said. The current plan allows the company to keep "75 percent of its dealers -- representing 87 percent of Chrysler sales," the Treasury said.