If sagging new-car sales hurt automakers, they’re downright killing dealerships. According to the National Automobile Dealers Association, nearly 700 retail stores will close their doors by the year’s end.
That number is up 62 percent from 2007, when 430 dealers were forced out of business. The increase in dealer closures will likely have a substantial economic impact – auto sales made up 18 percent of all U.S. retail sales in 2007, and the new cuts will likely eliminate close to 37,000 jobs.
Those terminations will likely come from states like California, Texas, Pennsylvania, and New York. Call it natural selection, if you will – those states have the highest dealer-to-sales ratio in the nation, and only the most successful are expected to survive.
Though automakers have long called for dealership consolidation as a move to reduce costs, closing such large amounts of dealers may create its own problems – particularly if chains were to fold. If such a situation were to occur, an automaker could be without sales outlets in select regions of the country.
Source: Wall Street Journal