NADA estimates 700 dealers will close in 2008
The sun will set on an alarming number of new car dealerships this year, according to The National Automobile Dealers Association, better known as NADA. This has been an ongoing trend, but it's set to accelerate as slowing new car sales and the tough credit market makes it very difficult for dealerships to stay open. After losing about 430 dealerships last year, the total stood at around 20,700 left, of which 700 are expected to close up shop before the end of the year.
This sobering statistic will have far-reaching effects on the nation's economy, as NADA estimates that 18% of all retail dollars are made at car dealerships, and 13% of the nation's payroll is paid to their employees. Closures will account for the loss of over 37,000 jobs in the United States and will only serve to complicate the oftentimes frustrating act of purchasing a new car for many Americans, not to mention making it that much harder for automakers to reach out to their dwindling number of customers.
[Source: The Wall Street Journal]
Reader Comments (Page 1 of 2)
geo.stewart 8:45AM (10/29/2008)
This will aid the US mftrs in culling the dealer count without having to buy out the dealer. Smaller dealers/ borderline dealers will the ones to close.
Yes, I have a heart for those that will be out of work but a lot of these will have been a long time coming. This will ultimately allow for a stronger business model to come out.
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Jared 9:01AM (10/29/2008)
I'll be really surprised if it is only 700 -- I expect many more than that will close.
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Josh 9:11AM (10/29/2008)
I don't care. Half of those dealerships are dishonest and do nothing but ruin the experience for the consumer under the guise of the car maker's brand.
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fixitfixitstop 11:36AM (10/29/2008)
+1
DJ 9:16AM (10/29/2008)
In some ways, this article is misleading or incomplete. There won't really be that many fewer places to buy a car, just a lot fewer standalone stores.
For example, if there is a seperate Jeep, Chrysler and Dodge dealer all on the same street and they merge into one superstore, it counts as two closings. You can still buy all three brands. In the long run, this makes total fiscal sense because you only have one service department, one back office and need fewer salespeople to handle all three brands.
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Kumar 9:47AM (10/29/2008)
I agree. The article says it could be a problem for car makers.
Merger or not, GM, Chrysler, etc, will be better off with less standalone dealerships.
It sucks for the people running those shops, but in the long run it means less hassle and cost for the consumer. As a loose example of the benefit, think of the last time you went into a walmart or target that didn't have a food section for one-stop shopping ? ;)
Stumpy 9:20AM (10/29/2008)
For the dealerships that do not merge. Where do all the vehicles go?
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Kumar 9:49AM (10/29/2008)
They give them away for free to any random person walking by.
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.
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More likely though, they will be sold/transferred to other dealerships, much like when you have a car transferred in from another state with the features you want.
Stumpy 10:14AM (10/29/2008)
But dealerships can not even sell the vehicles they have. I wonder if they want to increase their inventory when other dealerships could not sell those cars/trucks in the first place.
dukeisduke 10:01AM (10/29/2008)
The economy will succeed in doing what the Detroit Three haven't been able to do, due to state franchise laws - kill off excess dealers.
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jrhmobile 10:07AM (10/29/2008)
Wait a minute. Not to belittle the personal impact for employees and customers of 700 dealerships that may fail this year, but that's out of 21,000-plus existing ones.
This is the first time I've seen this number in context. That's only like 4% of the total. In today's economic climate, a lot of other business sectors are doing much worse. And putting this in context blunts the impact of how this story has been widely reported up to this point.
At this rate, these losses will have very little impact on the oversaturation of car dealers for the Big 3. And nowhere near the cataclysmic impact that has been breathlessly reported elsewhere.
Certainly the mainstream media may be spring-loaded to play up the "devastating impact" of this market realignment. But what's NADA's role in this? What are they looking for out of this? After all, they're the folks pimpin' this story to the media in the first place ...
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neothespian 10:26AM (10/29/2008)
Well, considering that the average dealership employs anywhere from 30 (small single brand complex) to 300 (multi-brand complex) employees, that could mean a domestic job loss of up to 210,000 in a worse-case senario.
Even at one TENTH that, it's alot of jobs to yank out from under the non-working public. And, not all of those jobs can be absorbed in other industries. Sure, you might be able to find work if you're a Janitor, admin assistant or the like from one of these dealerships. But, if you're a sales manager, master mechanic or sales associate then good luck finding another dealer looking to hire.
Then again, I'm thinking of the job market and the economy as a whole, and not the "Big 3".... because right now I could care less if the only cars left being made were 4-cylinder econobox sedans and vans. As long as the workforce is kept up and there is profit of SOME type rolling in, that is really all that should matter.
apearlman 2:14PM (10/29/2008)
There's a mistake in Autoblog's writeup. The post says "13% of the nation's payroll" is paid to auto dealer employees. The original article says "13% of the nation's RETAIL payroll." Big difference. Retail payroll is a small portion of total payroll.
apearlman 2:19PM (10/29/2008)
Neothespian, it occurs to me that mechanics could do better if car sales decline. After all, if we aren't buying new cars, it means we're keeping our old ones longer. Old cars need more repairs than new ones. Maybe those jobs won't be at dealers, but they will emerge somewhere.
Sharone 10:50AM (10/29/2008)
700 is a very low and rather optimistic number.
If Washington quits being socialist and lets the market sort it out, I'd say we'll lose about 5000 stealerships.
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Swede 11:09AM (10/29/2008)
Haha NADA? What a fitting name!
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Temple 11:18AM (10/29/2008)
came in this thread looking for a 'nada' joke :)
fixitfixitstop 11:38AM (10/29/2008)
You've never heard of NADA and you're commenting here? I hope you're not American.
jamie 11:52AM (10/29/2008)
Financing automobiles has become a major problem for the big three that will no doubt force a number of dealers to close. But here is some rather strange but good news for GM. It looks like Cerberus, GM and the FED are working hard to conclude the merger of all mergers. Apparently some rules do not apply anymore.
October 29, 2008, 11:19 am
GM Jumps On Fed’s Commercial Paper Financing
AFTER CREDIT LIMIT CHANGE, GM TAPS ON FED’S WINDOW
There’s very little in Detroit that would pass for irony these days, but perhaps this nugget would: the financing arm of General Motors (GM), which recently closed its financing options for prospective car buyers with relatively low credit ratings, has gotten permission from the Federal Reserve to access its new commercial-paper funding facility - even though the facility in question is supposed to be limited to companies with sterling credit ratings. Which the auto maker’s GMAC Financial Services, with its junk-rated credit facilities, certainly doesn’t qualify for. Nevertheless, a spokesperson for the operation, which is majority-owned by Cerberus Capital Management, acknowledged that GMAC applied for, and received approval to participate in the Fed’s generous financing operations, according to the Wall Street Journal. The move comes after GM announced earlier this month it would limit financing access to prospective customers with credit scores of at least 700 points, as well as further tighten its lending standards in its European operations.
Chances are neither move helps unlock the constriction in sales that has been at the heart of GM’s current distress. GM reported Wednesday that global sales declined 11% in the third quarter to just over 2 million vehicles. That would put the auto maker even further behind its Japanese rival Toyota Motor (TM) in the battle to remain the top auto company - a title that General Motors, which narrowly maintained its lead last year, has said is worth contesting. U.S. sales for both auto makers have been dismal in what’s proving to be the worst U.S. market for vehicle sales since 1993: GM sales here declined 21%, versus 18% for Toyota. GM’s Hummer unit alone saw a 55% decline in sales.
Doubling the prospective irony of junk-rated GM tapping the Fed’s commercial paper facility that’s supposed to be limited to highly rated corporate issuers: the likelihood that GM is going to ask for more federal financial help to execute on its ambitions to buy rival Chrysler. Of course, if that deal goes through as discussed - and, certainly, terms could change before any accord is struck - Cerberus would end up with GM’s 49% stake in GMAC. Which would mean the Treasury would be in the position of effectively bailing out the investment of a private-equity concern.
http://blogs.barrons.com/stockstowatchtoday/2008/10/29/gm-jumps-on-feds-commercial-paper-financing/?mod=yahoobarrons
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Driver X 1:32PM (10/29/2008)
It's easy to laugh at the US Auto Industry whenever, you are not effected. However America needs a strong auto industry. From the Manufacturer all the way down to the person washing cars in the dealership. No other industry offers so many jobs.
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