Chrysler LLC plans to shed 789 of its U.S. 3,200 dealerships, many located in the suburbs of major U.S. cities, it said in a bankruptcy court filing Thursday.
The automaker sought approval in a bankruptcy court filing to terminate franchise agreements with approximately 25 percent of its dealerships as of June 9.
In the filing, the company said many of the dealers' sales are too low. Just over 50 percent of the dealers account for about 90 percent of the company's U.S. sales, the motion said.
The move, which the dealers can appeal, is likely to cause devastating affects in cities and towns across the country as thousands of jobs are lost and taxes are not paid.
The U.S. automaker said it would not repurchase any new vehicles, tools or parts inventory from terminated dealers but will assist in finding buyers for stock, according to a memo to dealers that was obtained by Reuters.
Chrysler dealerships will not be the only ones scheduled to get bad news this week. General Motors Corp. is also expected to notify 1,100 dealers that it will not renew their franchise agreements.
Chrysler has received $4 billion in federal loans and has been operating in bankruptcy protection since April 30.