General Motors Co. softens its pre-bankruptcy plan for shrinking its U.S. retail footprint, reinstating half of the dealerships appealing closure.

“We are highly confident this is the right size with the right quality,” GM North America President Mark Reuss tells journalists during a conference call today to update the auto maker’s dealer arbitration process.

The auto maker argued fewer dealers will enhance the throughput and profitability of those remaining, allowing store owners to invest more into their operations and compete better against newer franchises from rivals such as Toyota Motor Corp.

But responding to the outcry from dealers and local communities, Congress pushed GM to rethink the reductions, as well as offer the option for arbitration, and the auto maker ultimately offered participation agreements to 4,100 dealers.

Some 1,100 of 2,000 eligible dealers asked to arbitrate, and today GM says 660 will be reinstated.

GM will offer arbitration to the 440 other dealers, although Reuss says the preference would be to settle outside of legal action. That would ultimately leave the auto maker’s network somewhere between 4,100 and 5,500 rooftops.

“It’s the right number, with the right performance, with the right people – all of those things,” Reuss says.

GM Vice President Susan Docherty, who heads and marketing and until a broad North American restructuring earlier this week also led sales and service, says the auto maker’s dealer footprint will shrink satisfactorily – but exactly how far remains a question.

“In terms of where all this is going to end up by the time we get all the dust settled by midsummer remains to be seen,” she says. “But the headline here is that our network will be smaller than it was prior to us going into bankruptcy.”

jamend@wardsauto.com