Car Dealers Change or Close

In a harsh downturn of the industry that saw some 700 franchises close last year, car dealers are faced with the tough decision to become foreign dealerships, used car dealers, trimming operations, merges or closures. There's no getting around change.

According to Automotive News, the Big Three had 14,199 dealerships in the United States at the start of 2008, while their foreign counterparts had 7,262 dealers.

The number of U.S. auto dealers declined by 700 in 2008, the National Automobile Dealers Association said. Almost 90 percent of those represented the troubled U.S. automakers. NADA expects dealership numbers to drop by another 900 this year.

"Recessions close dealerships," NADA economist Paul Taylor said. "But that's better than the automakers having to choose which ones go and which don't."

As profit margins decline, "family-owned dealerships will most likely need to get out or acquire other dealers," Fifth Third Bank analyst Mirko Mikelic said.

"In the long run it will be better for those who make it," he added. "It's almost like Darwin's theory of evolution. The strongest will survive."  [Reuters]