General Motors Co will begin notifying some of its 1,160 U.S. dealers marked for shutdown that their franchises will be restored after congressionally mandated arbitration, two sources briefed on the matter said on Friday.

GM planned to terminate franchise agreements with about 1,300 U.S. dealers as part of its U.S. government-sponsored bankruptcy last year aimed at returning the company to profitability. Some 1,160 of them have sought arbitration.

The U.S. automaker will begin sending letters notifying a significant number of the dealers who have appealed the closure that they will remain with GM, the sources told Reuters, asking not to be identified because the information has yet to be announced.

GM representatives said GM North America president and sales chief Mark Reuss will provide dealers with updates on the arbitration process at 2 p.m. EST and address the media at 3 p.m. EST. They declined to discuss details of the announcement.

A third source familiar with GM's plans said several hundred dealerships will be invited to stay in the fold.

The U.S. Treasury owns 60 percent of GM after the 2009 bankruptcy restructuring.

Congress in December required an arbitration process for terminated dealerships at GM and Chrysler, which received more than $65 billion combined in taxpayer-supported bailouts and other financing over the past year.

Chrysler closed nearly 800 showrooms last June when it emerged from bankruptcy under new management led by Fiat . More than half of them have sought arbitration, saying their franchise rights were terminated unfairly.

The arbitrator under the legislative plan would be required to consider dealer profitability over the past four years as well as how a dealer would support the plans at GM and Chrysler to become viable.

Arbitration would also take into account how well a dealership was capitalized and dealership performance.

GM Chief Executive Ed Whitacre said in January the company would review the circumstances surrounding termination decisions that were made under his predecessor, Fritz Henderson, who was forced out in December in a split with the board.

Reuss said three weeks ago GM hoped to settle as many claims as possible without an arbitrator and complete the arbitration process by the third week of June, before the Congressionally mandated deadline of July 15.

We are going to evaluate every single dealer who applied for arbitration. Not everyone is on equal footing, Reuss told reporters on the sidelines of the National Automobile Dealers Association convention.

GM has already agreed to reinstate dozens of dealers in an earlier, in-house appeals process. It has also budgeted up to $600 million to compensate dealers.

(Reporting by Bernie Woodall and Soyoung Kim, editing by Matthew Lewis, Phil Berlowitz)

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