NADA predicts 40 pct. jump in dealer closings
U.S. automakers looking to pare their dealer ranks are getting a little help from the economy. The National Automobile Dealers Association predicts slumping sales and higher interest rates will drive as many as 600 dealerships to close down this year, up nearly 40 percent from the 430 closures in 2007. The NADA said the bulk of the closings will be retailers of Chrysler, Ford and General Motors vehicles.
Paul Taylor, a NADA economist, said, “There are more dealerships out there than there are cars to sell.”
In addition to a light vehicle market that is down 11.2 percent for the first eight months of 2008, the cost of borrowing has skyrocketed. Dealers depend on affordable credit lines to finance inventory, fund day-to-day operations and sell automobiles. GMAC, co-owned by Cerberus and GM, has raised finance rates for all dealers by 50 basis points, or one-half percent, in September. The combination has already proven lethal to the largest Chevrolet dealership in the United States. Bill Heard Enterprises of Columbus, Georgia, closed its fourteen dealerships in seven states on September 24 and filed bankruptcy four days later.
Six hundred closings would represent about three percent of the 20,770 new car dealerships in the United States.
