May 20 (Bloomberg) -- General Motors Corp.’s Canadian unit said it’s notifying about 300 dealers today that their sales agreements won’t be renewed next year as the biggest U.S. automaker shrinks its retail network in the country by 42 percent.

The closings take effect when the sales accords expire in October 2010 and are targeted at urban markets in a bid to maintain dealerships across the country, GM said in a statement. GM has about 700 retail outlets in Canada.

Detroit-based GM faces a probable bankruptcy filing in the U.S. by June 1 as it works to cut debt and labor costs to return to profit after four consecutive annual losses. The closures flesh out the plan GM unveiled April 27 to curtail franchises in Canada, where sales plunged by 34 percent in the first four months of the year.

“In Toronto they have 34 dealerships, that’s way too many,” Paul Lamoureux, of Maisonneuve Chevrolet Pontiac Buick GMC Inc. in Montreal said in a telephone interview. “Toronto and Vancouver are going to be the most affected.”

Lamoureux, 59, has been a GM dealer in Montreal for 27 years and employs 80 people. He declined to give out names of Montreal-area dealers that will close.

Dealers to be closed received an e-mail at 2 p.m. today, he said. The dealers have a week to consider a financial package offered by the automaker, he said.

“Closing all these dealerships is bound to hurt sales,” Lamoureux said. “You can’t think people are going to travel 50 kilometers to buy a new car.”

E-mail Notice

Some Ontario dealers said they were told an e-mail notifying them of who will be shut down was supposed to come “first thing in the morning,” prompting Ken Thrasher, owner of Thrasher Chevrolet in Amherstburg, Ontario, to get to his business at 6:30 a.m. By mid-afternoon, Trasher said he still hadn’t received the e-mail.

“I’m sure there were a lot of sleepless nights all across Canada,” Thrasher said.

Thrasher, one of two GM dealerships in the community of 22,000, about 30 kilometers (18 miles) south of Windsor, has been in business since 1961 and employs 24 people.

Sales of GM light vehicles in Canada fell 24 percent in April to 29,476 units, according to Dennis DesRosiers, an auto consultant who publishes DesRosiers Automotive Reports. Year-to- date sales fell 34 percent from 2008, compared with a 21 percent drop for the overall market, Desrosier said in the report.

Not Bad

“The Canadian market is not that bad,” Dan Courville, owner of Dan Courville Chevrolet Ltd. in Sudbury, Ontario, said in a telephone interview. “I don’t quite understand how stopping their sales network is supposed to help them.”

The dealership has been in Sudbury since 1949 and Courville said he bought it 17 years ago. His is one of four GM dealerships in the nickel-mining city of 158,000, about 270 kilometers north of Toronto.

GM is in talks with the Canadian Union Autoworkers on a plan to cut costs. CAW President Ken Lewenza described the discussions on May 18 as “very, very difficult” because GM’s concession demands are greater than Chrysler LLC’s.

GM and Chrysler have received $19.4 billion in emergency loans from the U.S. government to stave off collapse.

GM must come up with a cost-reduction plan by June 1, Canada’s Industry Minister Tony Clement told reporters following a speech in Washington today.

“We have to move to a place where General Motors is going to be cost competitive in Canada,” Clement said. “As long as we hear reports there is progress being made, we will continue to support the discussions taking place.”

Chrysler, which is in bankruptcy and announced May 14 it was canceling 789 U.S. franchises, isn’t targeting any Canadian dealerships, said Steve Landry, the sales chief for the Auburn Hills, Michigan-based automaker.

To contact the reporter on this story: Joe Schneider in Toronto at jschneider5@bloomberg.net

Last Updated: May 20, 2009 17:14 EDT