Jan. 12 (Bloomberg) -- General Motors Corp. said it may lose as many as 500 dealers in its home market this year, an increase from 350 last year, as the largest U.S. automaker works toward a goal of cutting 1,700 by 2012.

The reduction will widen in part because of the strain of a fourth straight year of U.S. auto-sales declines and a company initiative to trim brands and emphasize only Chevrolet, Cadillac, GMC and Buick, GM North American President Mark LaNeve said in an interview today. GM may also have to spend more to convince some of its 6,400 dealers to consolidate, he said.

Culling dealerships and brands is part of GM’s plan that also includes trimming labor and debt costs to convince the U.S. Treasury Department that the Detroit-based automaker can survive and repay $13.4 billion in promised federal loans. GM has said it will fail without government loans.

“We had 13,000 dealers 18 years ago, so we’ve already cut that in half,” LaNeve said at the North American International Auto Show in Detroit. “We don’t want them to close all at once because we figure we lose sales for 18 months after a dealership closes until other dealers pick up the business.”

The expected reduction of 400 to 500 dealers will include owners retiring without being replaced, outlets failing in the slowing economy and GM helping consolidate stores in markets with too many locations for the same brand, LaNeve said. He didn’t say how much GM is spending on closing dealerships.

Paring Brands

The automaker is considering the sale of its Hummer and Saab brands, weighing options for Saturn and shrinking Pontiac to as little as one model as part of the plan to meet terms of the government loans. GM has about 400 dealerships for Saturn and 100 each for Saab and Hummer, LaNeve said.

GM may keep Saturn as it undergoes a needed pruning of its brands, Chief Executive Officer Rick Wagoner said today in an interview of Bloomberg Television. The automaker has been meeting with Saturn dealers and hopes to “come to a conclusion in the near term,” he said.

GM is trying to manage the process of trimming dealership to avoid the $1 billion cost incurred when it dropped the Oldsmobile brand in 2000, he said. GM provides 10 percent to 20 percent of the costs of combining outlets, with the rest from private funding, LaNeve said. The company’s share will probably rise if GM chooses to eliminate a brand, he said.

The company has already consolidated most of its Buick, Pontiac and GMC dealers into combined stores, said Susan Docherty, the North American vice president of the three brands. The combined outlets account for about 80 percent of the brands’ sales, and that will rise to 85 percent by the end of this year, she said.

“We’re past the tipping point,” she said. “Tough economic times can be very cleansing.”

GM has cut Buick from eight models in 2005 to three this year, and in the future will shrink Pontiac from its current six models, she said.

To contact the reporter on this story: Jeff Green in Detroit at jgreen16@bloomberg.net

Last Updated: January 12, 2009 15:00 EST