GM Canada to ax franchises next year

TORONTO (AP) — General Motors Canada is telling almost 250 dealers they will lose their franchises next year as the automaker thins dealer ranks to make the remaining outlets more profitable.

GM Canada said Wednesday that it is telling some dealers that their sales and services agreements won’t be renewed when they expire in October 2010.

Spokesman Stew Low said letters were being sent to about 245 of GM Canada’s 709 dealers. Further consolidation is expected to increase the number of shuttered dealerships somewhat beyond that by the end of 2010.

GM Canada plans a 42 percent cut in dealers. That is in line with what General Motors Corp. announced in the U.S. Last Friday, GM Canada’s parent company told 1,000 to 1,200 U.S. dealers they would lose their GM franchises next year.

While General Motors of Canada has cut its direct work force to 12,000 people, the dealer chain is estimated to employ 33,000 people.

“The economic implications, of course, are huge,” said Michael Hatch, chief economist at the Canadian Automobile Dealers Association, estimating 10,000 jobs could disappear.

The announcement comes as GM continues talks to extract further concessions from the Canadian Auto Workers. The CAW said negotiations were continuing with no indication of when or how they might conclude.

A May 15 deadline set by the federal and provincial governments has passed, but Federal Industry Minister Tony Clement said his officials have told him progress has been made.

“As long as we’re moving in the right direction, not the wrong direction, I’m willing to be patient on this,” Clement told reporters in Washington, where he was discussing the auto-industry crisis Wednesday with American officials.

Clement had said the previous day that there must be a resolution by May 31 — the deadline for GM to provide governments in Canada and the United States with a restructuring plan, which could include seeking bankruptcy protection.

The CAW recently reached an agreement with Chrysler. Chrysler has no plans to close franchises in Canada.