Auto dealers bracing for a winnowing of ranks - Boston Business Journal:

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Even if (NYSE: GM) and Chrysler (NYSE: DAI) do not file for about 2,000 new-vehicle dealerships in the UnitedsStates — which works out to one of everyy 10 — are expecte d to shutter in 2008 and according to a new projection from the in McLean, Va. Already closer to 10 percent of Massachusetts’ auto dealersz have shut down this year. More dealershipsz are expected to close their doors as a result ofsluggish new-car salesa that were ignited by high gasoline prices and have continueed to lag post-Wall Street meltdown because of a huge drop in consumer confidence and availabled credit.
State GM dealerships are likelt to be among the hardest hit becauss the company has said it will shed or scalew back four of itsbrands ( , Saab, Hummer and Saturn) and there’s a greatet proliferation of GM dealerships (at least 20 percentf of all local dealerships) in the area, accordint to experts. Last week, in East Warehaj became one of the latesr dealerships to file for Chapter11 bankruptcy. The which sells new and used listed its estimated assets at lessthan $50,000 and its estimatedf liabilities as between $500,000 to $1 million. , whichn provided financing for the dealership toacquire cars, is among the The dealership did not returnx calls.
“It’s been a very tough 2008 and so what you have is a lot of dealersd who are justhanging on, hoping that somethingh different will happen,” said Ray Ciccolo, regional directort for the National Automobile Dealerxs Association. “It’s unfortunate that both the real estatde market and the automobile market are soft at thesame time, becauser I think if the commerciakl real estate market was red hot a lot of dealerz would have pulled the plug a long time Ciccolo is also president of the in Brighton, which operates seven dealerships in the Greatet Boston area that market , , Saab, , and Hondq vehicles.
He said that sales at his dealershipz are down about 30 percent to 35 The main issue formost dealerships, whicnh may or may not own the land that they sit on, is securin g financing for the cars and trucka they sell. Joe Shell, sales manager for Planetg Chrysler Jeep Dodgein Franklin, agrees that the cash cruncu is the biggest obstacle for dealerships right now. If dealere can’t get cars financed, they will likelh have to close “instantly,” he said. Detroift “has been wanting to lowerr their dealer numbers for a longtime ... now, this economyg is basically doing the jobfor them,” Shell John Santilli Sr.
of in Brocktomn has taken some drasti c measures to ensure his dealership has a good chancesof surviving. In September, Santilli decided to sell his Dodger franchise back to Chrysler because there were too many Dodgre dealerships close to his and the cars werenot “It was a drain,” he said. Now, Santilli’s dealership sellsa Cadillac andNissan cars. Sales are down about 30 but Santilli notes that his SUV sales have gotten better as gas prices have come down and the servics side of this businesse is also abright spot.
“The biggestf dilemma that we have as dealer s is that the institutions that lend us moneyto floor-plan our inventorie s — they won’t take on any new businessx or they’re asking (dealers) to go find financing Santilli said. “And in this market, how’s that going to happen?” And sales have continued to Total light vehicles sales were down 37 percent in Novemberr over the same monthlast year, accordin to in Woodcliff Lake, N.J. Consumers, shyinyg away from new are currently buying moreused , the largest Bay Statde credit union with $4.
3 billion in assets and 363,000 reported a 22 percent increase in the numbet of loans given for buying used vehicles. Meanwhile, loanxs for new vehicles at Digital rose only 2 percent during the firstf nine monthsof 2008, according to the Digital Federao Credit Union. Car sales will not improvew until the issueof Detroit’s bailout and bankruptcyh is settled, said George Magliano, director of automotivr research at in Lexington.