About 2,000 U.S. new-vehicle dealerships — nearly one of every 10 — will close in 2008 and 2009, the National Automobile Dealers Association projects.
And that's the best-case scenario, under which no automaker files for bankruptcy or dies next year. A bankruptcy would accelerate dealership shutdowns.
The Detroit 3 are trying to consolidate and shrink their dealer networks. But many of the closings so far do not involve the metro-area stores the automakers want to eliminate.
Peter Welch, president of the California Motor Car Dealers Association, offers even a more dire forecast than NADA. He said California lost 116 dealerships in the first 11 months of 2008 and has just over 1,500 new-vehicle dealerships left. He believes closures will total 150 by year end and predicts as many as 500 closings in 2009.
"We had only 20 dealers close in all of last year," said Welch. "But that's accelerating. We had 17 go down in the month of November."
For much of 2008, Detroit 3 dealerships accounted for about two-thirds of store closures, NADA chief economist Paul Taylor says. That share will rise to more than 80 percent next year, Taylor predicts.
Taylor says the poor economy, plunging new-vehicle sales and tight credit for dealers and consumers are taking a heavy toll.
At the beginning of this year, Automotive News counted 21,461 new-vehicle dealerships in the United States. By the end of 2008, NADA expects that about 900 will have closed and 200 will have opened, for a net loss of 700.
Next year, Taylor predicts 1,100 dealerships will close and 200 will open, for a net loss of 900. "The new dealership openings will be largely offshore brands, including Mahindra and Mahindra of India," he said.
Distributor Global Vehicles USA Inc. plans to launch the Indian-import Mahindra light-truck franchise in late 2009.
In the recession year of 1980, Taylor notes, there was a net loss of 1,550 dealerships, out of about 28,000.
General Motors, Ford Motor Co. and Chrysler LLC are trying to shrink their U.S. retail networks in overdealered metropolitan areas. But the credit crisis is striking dealers randomly.
"The situation we're in isn't helping anything," said Ford spokeswoman Marisa Bradley. "This is definitely a mixed bag. Some dealers (going under) are in metro markets and some are in more rural areas."
Battered in Belleville
Joe Pfeffer's Chrysler dealership has operated in Belleville, N.J., an urban area next to Newark, for nearly 67 years. In October, Pfeffer had to close the dealership and give up the franchise.
His bank stopped financing all auto dealer inventory several months ago. Pfeffer contacted other lenders to finance the store's vehicle inventory, but none was willing to take on another domestic dealer account, he said.
Two years ago he was selling 50 new vehicles and 15 to 20 used vehicles per month. In September, his last month in business, Pfeffer sold seven new vehicles and about five used.
Pfeffer tried to sell the real estate, but prospective buyers could not obtain financing. "I don't think you could finance a hot dog stand right now," he said. "We can't do warranty work and we can't retail cars because we're not a franchised dealer."
Pfeffer said he is waiting for Chrysler to pick up the new vehicles that still sit on his lot.
He said: "Now we're just sitting here looking at the cars and hoping nobody vandalizes them."
http://www.autonews.com/apps/pbcs.dll/article?AID=/20081215/ANA06/812150361/1203 (printed in total, subscription only)
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