General Motors Corp., racing to cut its debt and operating costs, is notifying about 1,100 of its 6,000 dealerships that their franchise agreements with the automaker will likely not be renewed beyond October 2010, meaning most of those dealerships will close by next year.

The notifications, sent out yesterday, marked another step toward bankruptcy for GM, the largest American automaker. It's unknown how many Pittsburgh-area dealerships will close as a result, though Pennsylvania, because of its large number of dealers, also figures to bear a large share of the cuts.

Most dealers were mum yesterday, though, as there's little incentive to reveal closures before they absolutely have to. If they publicized the news, dealerships would have to contend with bargain-hunting customers and defecting employees.

One dealer willing to talk was Paul Ereditario.

"I got a letter," said an angry Mr. Ereditario, owner of Victory Chevrolet in Dunbar. He said his franchise agreement runs to 2013, not next October.

Still, the FedEx delivery yesterday didn't exactly come as a shock. He'd started getting pressure several months ago from GMAC, the bank that helps finance many dealers' inventory. When that organization indicated it didn't want to continue helping him acquire vehicles, Mr. Ereditario said he filed for Chapter 11 bankruptcy reorganization protection.

He'd been stocking more than 60 vehicles and had between 15 and 20 people on staff. Now, he's got about 30 new cars on the lot and just five or six employees.

Mr. Ereditario has until the end of May to respond to the letter, which he said did not bear anyone's signature. Whether or not he does, he said he is not planning to keep Victory open through next year. "I'm not going to prolong the agony."

GM's agony, though, is sure to be prolonged, and bankruptcy could be near. The company's vice president for vehicle sales and marketing said the dealership closures would be more difficult to enforce -- and could prompt legal challenges from affected dealers -- unless GM, like Chrysler LLC, enters into bankruptcy. The filing could come by June 1.

After that, the affected dealers will learn more about the closure process, and what kind of aid they can expect from GM.

Mark LaNeve, the GM vice president, said during a conference call yesterday that the dealerships on the list were smaller, under-performing sellers. Though the 1,100 dealers represent 18 percent of the company's retail footprint, they accounted for only 7 percent of sales and 8 percent of inventory, about 65,000 automobiles.

If it received a letter yesterday, a dealership had probably received a letter in the past, too, notifying it of its below-average sales figures. "The dealers receiving these letters, unless they haven't been paying attention at all," should have known their scores and seen this coming," said Mr. LaNeve. Even if GM weren't contemplating bankruptcy, these dealers "would be very much at risk" of closure by attrition, since the company's sales volume has dropped so precipitously in the last 24 months.

GM's dense network of dealerships was at one time a strength, but that was back when GM lines -- Chevrolet, GMC, Oldsmobile, Buick, Pontiac and others -- accounted for half of all U.S. auto sales.

Today, GM models account for 20 percent of U.S. sales.

It's been a bloody couple of days in Detroit, and within the auto industry nationally. GM's announcement came one day after Chrysler, which is already in bankruptcy protection, announced plans to shed 789 of 3,181 dealers, including 16 in the Pittsburgh area.

Unlike Chrysler, GM did not publish a list of affected dealerships, saying it was up to the dealers to eventually disclose that information. Mr. LaNeve noted that the list was of GM's own creation, crafted without input from the White House or the federal Treasury.

"Nobody has seen a list except for myself and my team," he said. GM has already received more than $15 billion in emergency loans, and is effectively under the stewardship of the federal government, which two months ago, in an unprecedented and controversial show of force, required GM CEO Rick Wagoner to vacate his job.

The Department of the Treasury issued this statement yesterday: "As difficult as these announcements are for the dealers that will no longer be selling GM and Chrysler cars and the communities in which they operate, without the president's intervention, the entire GM and Chrysler dealer networks could have been lost. The Administration's commitment to this industry has given both companies a new lease on life."

Mr. LaNeve, chatting with reporters from inside a Cadillac Escalade, said GM is aiming for somewhere between 3,600 and 4,000 dealerships in its total network. That would mean cutting not only 1,100 GM dealers, but also its related brands -- GM is searching for buyers for its Saturn, Hummer and Saab brands, Mr. LaNeve said.

The automaker previously had announced that the Pontiac line would be discontinued. Together, those four brands account for an additional 470 dealerships, nationally.

When GM closed out its Oldsmobile line in the early 2000s, shuttering 2,800 Olds dealerships in the process, it spent more than $1 billion to do so, buying back unused inventory and compensating Olds dealers for their troubles. This time, it seems, there will be no such compensation package.

Mr. LaNeve also stressed that the dealerships would not be closing immediately, nor would GM wish that, since the company would be stuck with tens of thousands of unsold stock in that case. He said affected dealerships should use the coming 17-month "wind-down" period to clear out inventory.

Some dealers speculated that the October 2010 "wind-down" deadline was illusory, one that would disappear once GM filed for bankruptcy and the court allowed GM to break agreements with franchisees.

However long the intervening period actually lasts, some dealers will undoubtedly use it to contemplate legal action, since the dealership closures amount to the termination of thousands of GM-affiliated employees. Still others could merge or fold on their own, and GM hopes those actions will bring the total number of dealers below 4,000; still others may file for bankruptcy independent of GM (or already have).

Even safe dealers were dreading yesterday's news.

"As a dealership I don't want to hear anyone has closed," said Bill Frazier, sales manager at Classic Chevrolet in Bellevue. "There's people involved here who have built their lives around this industry, and I don't want to see anything bad happen to anybody."

His company received no notification from GM yesterday. Neither did Century III Chevrolet in West Mifflin, said general manager Bob Fallon.

The 74-employee dealership is consistently among the top three Chevrolet dealers in Western Pennsylvania. And he thought many Chevrolet dealers in the area would be OK because the brand tends to be strong in this region.

Mr. Fallon said both Chrysler's and GM's plan to thin the ranks of dealerships will cause pain in the short term. "I feel bad for the Chrysler and GM dealers that are going to lose their lifetime's work," he said.

It also may cause an accelerated dip in sales, faster than sales are already declining. That's because when a dealership closes, it takes several months for the cars that would have been sold at that location to translate into equivalent sales at nearby GM dealerships.

The Associated Press reported that FedEx letters bearing the bad news began arriving yesterday morning at GM dealers around the country. The letter says that dealers were judged on sales, customer service scores, location, condition of facilities and other criteria.

"Based on our review and current foreseeable market conditions and your dealership's historical performance, we do not see that GM have a productive business relationship with [your dealership] over the long term," read the letter, a copy of which was obtained by the AP.

However, the letter allowed the possibility of a reversal: "Please understand that our planning in this regard is not finalized, and we are prepared to give you until the end of the month to submit any information you would like us to see."

Bob Baierl, vice president of operations at Baierl Chevrolet in Wexford said the dealership had not received the dreaded missive from GM, and that he was trying to maintain a positive outlook.

"We believe that because of how long we've been here and how well we've performed that we'll continue to be part of their distribution network," he said.

Not that it will be easy.

"What we're trying to do internally is to keep our sales team focused, manage our inventory correctly and control expenses."

Meanwhile, the Wall Street Journal is reporting that GM may be near a deal that would cut hourly labor costs by more than $1 billion a year and reduce GM's $20 billion health-care pledge to the United Auto Workers. The deal could still fall apart, the paper said.