WASHINGTON - General Motors Co and Chrysler proposed steps on Thursday to resolve complaints from terminated dealerships and head off potential congressional intervention.

GM and Chrysler each said they would establish a binding review process to evaluate closures, and determine whether they were based on business decisions.

The companies also promised more transparency.

Chrysler held out an opportunity for terminated dealers to join their revamped sales networks, while GM said it would try to increase the diversity of its network.

The issues are important for GM and Chrysler to resolve since they do not want Congress to potentially reopen key restructuring moves that were approved by the Obama administration and two bankruptcy judges.

The companies are trying to revamp their businesses and compete with nimbler rivals in an uncertain market.

A major dealer group, however, was not satisfied with the GM proposal and said Chrysler, which is now run by Italy's Fiat (FIA.MI), needed to clarify aspects of its plan.

We (will) continue to work with Congress on the pending 'dealer rights' legislation in the event a non-legislative solution cannot be achieved, the National Automobile Dealers Association (NADA) said in a statement.

GM plans to wind down up to 1,300 franchises by the end of 2010 while Chrysler has already cut nearly 800 showrooms.

The decisions were made by the companies during their bankruptcies this summer as a way to operate more efficiently.

Hundreds of dealers have complained that their franchise rights were violated and sought relief from the government.

The dealerships have some leverage with lawmakers since their businesses are important to local economies and they are important donors to candidates and political causes.

Some dealers have complained that the closures were political, arbitrary or based on factors other than their performance. They sought relief from lawmakers, who threatened legislation unless the companies' devised compromises.

The moves were a step back from the initial dealer closure plans. There was no immediate indication that the overall number of terminated franchises would change.

GM values its dealer body and recognizes the contributions they are making to the future viability of the company, General Motors said in a statement.

GM has already set aside up to $600 million to pay dealer wind down expenses, while Chrysler has found buyers for discontinued inventory and made arrangements to repurchase parts from dealer repair services.

While Chrysler has not closed to door to further discussion with the dealer groups, Chrysler believes that the process it offers today fully addresses concerns that Congress and the discontinued dealers have raised, the company said.

Nearly two dozen U.S. senators wrote to executives at both companies in recent weeks urging them to resolve the matter quickly.

The Obama administration, which oversees the U.S. Treasury's controlling stake in GM and its nearly 10 percent interest in Chrysler, has urged the parties to work something out but has not been directly involved in the talks. (Reporting by John Crawley, editing by Gerald E. McCormick and Ted Kerr)

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