GM to warn 1,000 underperforming dealers this week

General Motors will send warning letters to about 1,000 of its underperforming new car dealers tomorrow that will warn the dealers that their franchise agreements will not be re-signed when they expire in October of 2010. The 1,000 dealerships are the first of about 2,600 the Detroit automaker plans to cut by the end of 2010.

In order to meet the restructuring guidelines instituted by the Obama administration, GM must show evidence by the end of this month that it is working to significantly reduce the size of its dealership network.

Including the 500 or so Hummer, Saab and Saturn dealers that will no longer be a part of the GM distribution network when the automaker sells those brands, GM will have about 1,100 dealers to cut over the next 18 months.

A source told Automotive News that the letters will be sent out tomorrow and that dealers should expect to receive them on Friday. They will detail why the dealerships are being dropped, including how the dealers failed to meet the franchise agreements they agreed to. Naturally, it's expected that the backlash will be strong.

GM says it will probably lose another 500 dealerships that will choose to close their doors later this year, meaning that another 500 or 600 will have to be closed through negotiations and consolidations. The automaker has about 6,250 dealerships in the U.S. currently.