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Dude, where did all the dealerships go?

nippononlynippononly SF Bay AreaPosts: 12,693
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.

http://wardsdealer.com/ar/auto_dying_dealerships/

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?

2013 Civic SI, 2009 Outback Sport 5-spd (stick)

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Comments

  • carthellcarthell Posts: 124
    "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).
  • nippononlynippononly SF Bay AreaPosts: 12,693
    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.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • andre1969andre1969 Posts: 22,052
    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! :sick:

    I don't know the Chevy dealer's story, but I wonder if the Toyota dealer is expanding?
  • nippononlynippononly SF Bay AreaPosts: 12,693
    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....

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • lemkolemko Posts: 15,196
    ...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.
  • bumpybumpy Posts: 4,435
    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.
  • fezofezo Posts: 9,387
    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.
  • nippononlynippononly SF Bay AreaPosts: 12,693
    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?

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • euphoniumeuphonium Great Northwest, West of the Cascades.Posts: 3,338
    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.
  • fintailfintail Posts: 33,968
    In my area the Caddy dealer changed hands and moved from its location of some 35 years - I think it was leased land, now in demand for high density residential use (once the recession ends). Now they share a location with the Hummer dealer, which I think is under the same ownership. So, we have GM's best and GM's lamest in one spot.

    The other local dealers seem to be surviving in their locations. There are small startup highline used car dealers that seem to appear and fail every year or two.
  • nippononlynippononly SF Bay AreaPosts: 12,693
    Yes, I'm sure that consolidation of dealerships will continue for domestic brand dealers, and in fact my local Ford dealer picked up L/M this past year from a dealership that closed a few miles up the road.

    But I think the big news is outright dealer atttrition, and certainly that is mostly what we have had in the Bay Area - dealers going away and NOT being picked up by a different dealer elsewhere.

    In California Big 2 market share is only like 22% between the both of them, so it makes sense that there shouldn't be 3 Chevy and 3 Ford dealers for every Toyota dealer.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • joel0622joel0622 Posts: 3,302
    Keep in mind that at least in Fords case that the closing of Dealerships is part of the Way Forward plan. Reduce the number of Dealerships over the next 5 years so we have more profitable stores. Allot of these stores that you see "closing" have actually been bought out.

    It has happened here, one Metro point closed in the spring. Ford and the surrounding Metro Points participated in the buy out. The closer your store was to the closing point the more you paid.
  • nippononlynippononly SF Bay AreaPosts: 12,693
    Well the two Ford dealers near me that went out of business in the last few months disappeared in the middle of the night and made quite a splash in the news, as their owners went bankrupt in spectacular fashion and were very vocal about it. Neither was bought out. And now there is an urban area of a quarter million people without a Ford dealer, as the two were in neighboring suburban cities. But the folks living there wouldn't have to drive more than about 20 miles today to reach a Ford dealer, so it may have been a case previously of too many dealers, too close together.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • fezofezo Posts: 9,387
    I'm almost ready to get a pool going as to which is the next dealership in town to fold. So far we only had the one and it only closed the Cadillac franchise and is still selling Chevies but to me the writing is on the wall.

    My money would be on the Chrysler dealership. He's got Chrysler and Dodge which leaves him with nothing new of interest to me. He does have a fair number of used cars but they are overwhelmingly Chrysler products as well.

    The other dealers in town are a Pontiac-Buick-GMC and a big "family of dealerships" that sells Ford, Lincoln, Mercury, Jeep, Suzuki, Nissan and Honda. Maybe at one point he'll replace the Suzuki dealership with something else but he does seem to sell enough of the things.
  • andre1969andre1969 Posts: 22,052
    I searched for how many dealerships there are in my area. Within a 25 mile radius, there are 21 dealerships that sell Chevy. 19 that sell Ford, 18 that sell Toyota, and 16 that sell Dodge.

    Oh, and 8 Saturn dealers. Well, 7, as the finder included the now-closed Saturn of Bowie.
  • fezofezo Posts: 9,387
    Wow. I live in a county of half a million people and I'll bet we don't have anywhere near that number. Now I'll have to check...
  • nippononlynippononly SF Bay AreaPosts: 12,693
    I'm intrigued that you have a Honda dealer (and most other brands) but no Toyota dealer? That's surprising.

    andre: you sure about those numbers? That sounds awfully high. A 25-mile radius is an area of 1962 square miles, or roughly 40x50. And as a for instance, I would be VERY surprised if Toyota allowed an area that size to have more than 10-12 dealers, even if it were very densely populated.

    There is only one Cadillac dealership in my county, which also sells about five other brands including Hummer and Hyundai. They WERE making big plans last year for a major expansion of teh Hyundai portion, but those seem to have fizzled out. They are still selling the Hyundais out of a shack on wheels out past the end of the lot for the other brands. it's no wonder they don't sell very many - Hyundai is obviously the redheaded stepchild over there!

    In the next county over, all of the Buick and GMC dealers have gone in the last 2 years, although one of those dealers continues to sell Cadillac and Mazda and appears to have very recently picked up Pontiac. How about THAT for a mix? Pontiac-Mazda-Cadillac.

    I think I would rather see bailout money for these dealerships than for the automakers: half of these dealerships are small family businesses and all of them provide other services that they could continue in order to be viable (especially service and repair including manufacturer warranty work). These are local businesses that impact my friends and neighbors and are being strained through no fault of their own.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • fezofezo Posts: 9,387
    I've wondered about that myself. Maybe Toyota thinks that 20 miles north is close enough which I suppose it is. The dealership is very big. I would think a Toyota dealer in town would do a heck of a business. I've been thinking that for maybe 20 years....

    Just for the heck of it I checked and there are two Ford dealers within 25 miles of me. If you expand it to 28 miles you get three more including one that's just Lincoln Mercury.
  • andre1969andre1969 Posts: 22,052
    andre: you sure about those numbers? That sounds awfully high.

    Well, that's what the internet said, and it wouldn't lie, would it? :P One thing though, the way these mapping things work, it's 25 miles as the crow flies. For instance, it plotted the dealership I bought my Intrepid from at around 12 miles away. It's more like 16-17. So I'd say that some of these places that the mapping features thought were only 25 miles could really be more like 30 or even 35 to drive them.

    Still, a 25 mile radius from my zipcode, 20769, basically encompasses my whole county. Also everything within the Washington DC Beltway, which includes parts of Virginia. About half of Baltimore also fell into that swoop. Going into southern Maryland, it just swallows up Waldorf, which I think is the biggest town down there. And going east, it just reaches across the Chesapeake Bay. So I'd imagine there's about 2 million residents, if not more, within the boundaries of that radius.

    Also, some of them are paired up. For instance, the dealer I bought my Intrepid from also sells Chevies. Interestingly, just a few years ago, a disproportionate amount of their business was Dodge. So now with Chrysler's fallout, I wonder how they're faring?
  • carthellcarthell Posts: 124
    Well, when you live in the megalopolis known as Baltimore-DC-NoVa, there's a lot of people with money that have to be served. Government money. Private research and tech money. Health care money. To a lesser extent, manufacturing, water-dock and transport money.

    Even so, there were (in the Baltimore area) four long-standing, new-car dealerships or dealership chains went bust over the past three years. No new Ford/Lincoln/Mercury, Kia, VW, or Suzuki products can be bought in the city. If you're a young 'un in the city who wants a new car, the bus can be taken to the local Toyota (1) or Chevy/Pontiac/Buick/Honda (1) dealer.
  • nippononlynippononly SF Bay AreaPosts: 12,693
    You've been thinking that for 20 years and you haven't applied to Toyota for a franchise? What are you waiting for??? ;-)

    One thing I DO expect to disappear is Lincoln Mercury dealers - I expect they will mostly be consolidated into Ford dealerships. None of the new Lincolns has really hit the sales sweet spot including the very latest ones.

    Dealers that WANT to consolidate and are not being assisted in doing so by the manufacturer would be another group I think should be eligible for some bailout money, before we hand billions to corporate execs at the automakers.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • General Motors has over 7,000 dealerships for its Buick, Cadillac, Chevrolet, GMC, Hummer, Pontiac, and Saturn brands in the U.S. (Saab excluded), while the Ford Motor Company has around 4,400 dealerships. The linked article compares both to Toyota Motor Co. which currently has 1,430 dealerships.
  • fezofezo Posts: 9,387
    I thought about seeing what would be involved in a Toyota franchise but I can't imagine actually putting all that together. I guess no one else did either...

    20 miles isn't far. I would think Toyota likes it that way.

    Some of the luxury brands aren't even in te county - Lexus, Infiniti, Acura. We used to have BMW, Mercedes, Porsche and Audi franchises up by the Toyota dealer is but they've been gone for years.
  • nippononlynippononly SF Bay AreaPosts: 12,693
    There's no link in your post as far as I can tell. Would love to read it if you would post again and provide the link.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • boaz47boaz47 Posts: 2,750
    The news had a picture of the Port of LA harbor. The lots were full of cars, imported, and they were not moving. It was either NBC or CBS I don't remember which. The did a brief special on the problem. The largest premium foreign car dealer in Orange county just closed. There are more than domestic dealers taking a hit. he OC register said:
    "At least nine Orange County auto dealers – selling Chevrolets, Chryslers, Dodges, Nissans, Saturns and other brands – have closed since January, brought down by sluggish sales and tight credit."

    It isn't likely to get better anytime soon and I wouldn't be surprised if more dealerships close. But the used car market should blossom.
  • steverstever Viva Las CrucesPosts: 41,296
    This one is Long Beach (maybe the same place?).

    image

    Imported vehicles piling up at ports of entry

    Moderator
    Minivan fan. Feel free to message or email me - stever@edmunds.com.

  • jchan2jchan2 Posts: 4,956
    to see a few Priuses in that lot- aren't those selling well, despite the slump?

    I would think that Toyota would want to get those Priuses out of the port and into dealers...
  • nippononlynippononly SF Bay AreaPosts: 12,693
    Everything imported sits in those lots for a few days, they have to clear customs or something.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • boaz47boaz47 Posts: 2,750
    Yes, that looks like the Vincent Thomas Bridge in the back ground. But that is only a small part of the number of cars there. I can remember when those lots were almost empty at least half of the time. It is pretty much as Nippon posted earlier in a forum about Toyota, even they are suffering. No new cars are selling well, some are selling but there is a glut in the California market. Nissan is even worse off from what I have been reading. The news said the dealers simply don't have room for them so they are sitting there in that salt air for 60 to 90 days. It is absolutely true the domestics are being hurt and the domestic dealers are suffering but the imports didn't escape and we can't see the end of the tunnel yet. This is not the normal turn around that those of us living in this area have seen for years. But then the News could be just pushing our buttons. But Edmunds published the article and when they say MB has had cars there for a few months that is more than two. This is way beyond clearing customs. Just read the article it sounds pretty much like what the News said.
  • steverstever Viva Las CrucesPosts: 41,296
    so they are sitting there in that salt air for 60 to 90 days.

    I'm sure they are well protected with Cosmoline. :P

    Every tire is probably pumped up to 60 psi too.

    Moderator
    Minivan fan. Feel free to message or email me - stever@edmunds.com.

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