GM to keep more than half of dropped dealers

General Motors, the carmaker with the most dealerships and the largest percentage of rural dealers, says it will keep 661 of the 1,100 it planned to drop last year. Letters going out to the dealers say they will be required to prove "adequate financing and operating capital, as well as positive customer satisfaction reviews," Dana Hedgpeth of The Washington Post reports. The move "could provide economic relief for hundreds of communities nationwide," write Jerry Hirsch and Tiffany Hsu of the Los Angeles Times.

Industry experts argued last year that GM needed to drastically reduce its dealer network, the industry's largest, but Jeremy Anwyl, chief executive of auto information company Edmunds.com, told the Times that keeping or reinstating the dealers "is unlikely to hurt GM's financial performance." He said, "It doesn't really cost GM that much to have a dealer that is not very successful. . . . A large number of dealers gives you coverage in rural America," he said. "Where are those people supposed to buy vehicles?" (Read more)

GM did not name the dealers who will get the letters, but said it would call them next week. Most of the dropped GM dealers submitted their claims to arbitration. About 400 of the 789 dealers being dropped by Chrysler Corp. "have filed arbitration claims, and Chrysler said it expects the arbitration hearings to start at the end of March or early April," the Post reports.