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#1 of 726 Dude, where did all the dealerships go??
Nov 19, 2008 (8:39 pm)
One thing that seems certain to happen whether or not the domestics get their bailout is that we will lose a lot of dealerships this year and next, and almost all will be domestic dealers. Indeed, this seems to be almost fortuitous for all three U.S. automakers, who need so desperately for their dealer networks to shrink.
On the news tonight, they announced that here in California in October alone, 70 new car dealerships went out of business. That makes 97 for the year through October 31 in California. The latest here in the Bay Area was San Francisco Chrysler Dodge Jeep, which went belly up today. I bet the count for California is over 100 by now.
But it's certainly not limited to California. A quick Google search gets you hundreds of hits of news reports on dealerships closing all over the country. Here are just a couple....
Midlothian (Illinois?): http://www.suntimes.com/business/1286854,111908sunrise.article
Leonardtown, MD: http://www.newsweek.com/id/165378
And of course, the famous Bill Heard Chevrolet: http://jalopnik.com/5056225/exclusive-inside-the-fall-of-bill-heard-chevrolet-th- - - - - e-worlds-largest-chevy-dealership
NADA is initially estimating that some 700 will close this year, which would be 50% higher than last year, yet still seems to be underestimating the loss. Some think it might be much much higher...
Michael Jackson, CEO of the nation's largest dealer group, AutoNation Inc., estimates nearly 1,000 stores will close this year with another 1,000 closing in 2009.
Mark Rikess, an automotive retail consultant and analyst believes the industry will lose close to 2,500 dealerships by the end of 2009.
A study by Grant Thornton LLP Corporate Advisory and Restructuring Services concludes nearly 3,800 stores will have to close just for dealerships to maintain the industry's 2007 average of selling 750 units per dealership in 2009.
Some dealers tell Ward's they think nearly 8,000 dealerships could be wiped out. Watching that many dealerships disappear is unlikely, but the fact some dealers are thinking it describes the uncertainty many of them have regarding their survival.
So the question I have is whether this was ultimately inevitable, given that the ones closing up shop are almost exclusively domestic brands. GM has 7000 dealers and a market share of 22%. Toyota has 1200 dealers and a market share of what, high teens? Toyota has always said publicly that one of the keys to the strong health of its dealer body was the high per-store sales rate, and that it takes great pains not to allow stores to be too close together or infringe on each other.
Is this wave of dealership failures a favor in disguise for the domestic automakers? Or should these dealers be getting a taste of all this bailout money floating around? There were 20,700 dealers in this country at the start of the year, according to NADA. There may be 2000-4000 less by the end of 2009. Or perhaps we could lose even more than 4000. Should something be done, can something be done? Or do we sit back and let free market principles do their job, and add thousands and thousands of people to the unemployment rolls? What do you think?
#2 of 726 Re: Dude, where did all the dealerships go?? [nippononly]
Nov 19, 2008 (9:12 pm)
"Is this wave of dealership failures a favor in disguise for the domestic automakers? Or should these dealers be getting a taste of all this bailout money floating around?"
Maxine Waters is pushing for dealer financing support if the big 2.8 get a credit line from the government. If passed (that's extremely iffy), that won't help the domestics (don't throttle me for using the term) rightsize themselves into companies that can compete in the US market.
I do not like unemployment. I spent most of my 20s out of work, and without health benefits. But what is happening with the domestics now was written a long time ago (you can boost sales using passenger trucks, fleet sales and rebates for only so long).
#3 of 726 Re: Dude, where did all the dealerships go?? [carthell]
Nov 20, 2008 (6:41 am)
I think if they do wind up finding government-backed financing for dealers, that should stem the tide of the ones going out of business, but I wonder how appropriate that would be.
I have been in towns with populations as small as 1000 that have their own Chevy and Ford dealer. In many cases, those towns are within 40 miles of a city with a population over 100,000, which has its own dealers, both domestic and import. What can really be the future of these tiny-town dealers?
OTOH, if as one is led to believe the service and used car sales are the main profit engines for dealerships, then I guess their future may yet be bright. People will always need service for their vehicles, and used car sales are much less dependent on captive financing from the manufacturers.
#4 of 726 I don't know the details behind it...
Nov 20, 2008 (6:58 am)
but we're about to lose our local Saturn dealer. I've never really had any dealings to them, other than delivering a pizza to them once or twice back in the day, and dropping by once with my Dad when he was car shopping. But they always seemed cool.
I don't know what the details are, but the land under the dealership has been sold, so they're bailing out.
Edit....Wow, it happened quicker than I thought. I went to their website and see that they're already closed! http://www.saturnofbowie.com/
There's also a Chevy dealer behind them, and a Toyota dealer next door. Last time I was at the Chevy dealer was a few years ago when I had to get a power window switch for my truck. They were so dead that the $41.40 I spent on that switch was probably the most profit they made all day!
I don't know the Chevy dealer's story, but I wonder if the Toyota dealer is expanding?
#5 of 726 Re: I don't know the details behind it... [andre1969]
Nov 20, 2008 (7:30 am)
The funny thing in my area is that every time a domestic dealer goes out of business, the neighboring Toyota dealer expands into the space.
The dealers I have been seeing going under are mostly Chevy, Ford, Chrysler/Jeep/Dodge, and Pontiac-Buick-GMC. I would have thought the Saturn dealers would have gone already that were going to go, back when they had no product to sell....
#6 of 726 Scary...
Nov 20, 2008 (7:42 am)
...I was just up at my Cadillac dealership for an oil change and inspection/emmissions and more normally upbeat service advisor was quiet and reserved. I'm sure he's concerned about his job and the future of his workplace. This is the human face of the crisis the automakers are facing.
#7 of 726 Re: Dude, where did all the dealerships go?? [nippononly]
Nov 20, 2008 (7:53 am)
What can really be the future of these tiny-town dealers?
I think more of them will survive than you might expect. A car dealership can be run with no more than maybe half a dozen people on staff, and most of those small dealers don't have any debt to carry. The local Chevy dealer (where I bought the S2000) is more of a used-car dealership these days. They have a Prius on the main line in front of the building today.
#8 of 726 Re: Dude, where did all the dealerships go?? [bumpy]
Nov 20, 2008 (8:02 am)
I don't know if this gets filed under domestic vs. import or high end vs. low end.
Our local Caddy dealership has closed after maybe 30 years. They are still in business but only sell Chevrolets in their new car department. Meanwhile, down the road maybe a mile a new Hyundai dealership will be opening.
Up the road at the nearest big town the Chrysler dealership is gone. The Mitsubishi dealer has been gone for a while but that's been tried at least twice in the area and just never supported enough business even in the good times.
#9 of 726 Re: Dude, where did all the dealerships go?? [bumpy]
Nov 20, 2008 (8:42 am)
Still I would think that if the tiny-town dealer was within a 50-mile radius of a larger town with one or more large dealerships, their future is dim....and that describes most small-town dealers in California. I realize it is different in other parts of the country.
Should those dealers that are struggling get a piece of the bailout pie?
Nov 20, 2008 (9:16 am)
Two Lincoln/Mercury dealers folded, but Landmark Ford picked up the two marques without skipping a beat. Consolidation of local dealers will happen where the surviving dealer has the financial reserves to take advantage of the economy.
When a business doesn't plan for a downturn, it deserves to be swallowed up.