General Motors (GM) notified 1,100 of its 6,000 dealerships recently, that it is terminating their contracts with the struggling automaker, the first step in cutting up to 40% of its retail network. GM spokeswoman Susan Garontakos said that the dealers receiving notice are being told that their contracts will not be renewed in October 2010. Many of them are expected to close shop this year.

The company is likely to cut another 900 and eventually get its network down to between 3,600 and 4,000 dealers by next year, GM vice president Mark LaNeve said.

Of the 900, about 500 will come from GM\'s plans to sell or close four brands - Saturn, Hummer, Saab and Pontiac. Another 400 dealers will be eliminated in a second cut as GM continues to restructure. On top of the dealers GM is cutting, LaNeve said another 400 will be lost through attrition and consolidation.

The company's expectation is that the surviving dealerships will become larger and more profitable as a result of the thinning out, which in turn will allow them to spend more on advertising and facilities. But GM also acknowledges, that its long-term decline in U.S. market share will continue as a result of the smaller network of dealers.

The move comes a day after Chrysler LLC announced that it is dropping nearly 800 Chrysler, Dodge and Jeep dealers, or about a 25% of its network, as part of its bankruptcy restructuring. The Chrysler dealerships agreements will be terminated around June 9.
 
GM, Chrysler and Detroit rival Ford Motor have far larger U.S. dealer networks than their Asian rivals, a remnant to the days when the so-called Big Three dominated the market in a way they no longer do.