GM Expects To Lose 500 US Dealerships

Bloomberg is reporting GM Expects to Lose as Many as 500 Dealers in U.S. This Year.

General Motors Corp. said it may lose as many as 500 dealers in its home market this year, an increase from 350 last year, as the largest U.S. automaker works toward its goal of cutting 1,700 by 2012.

The reduction will widen in part because of the strain of a fourth straight year of U.S. auto-sales declines and a company initiative to trim its brands and emphasize only Chevrolet, Cadillac, GMC and Buick, GM North American President Mark LaNeve said in an interview today. GM may also have to spend more to convince some of its 6,400 dealers to consolidate, he said.

“We had 13,000 dealers 18 years ago, so we’ve already cut that in half,” LaNeve said at the North American International Auto Show in Detroit. “We don’t want them to close all at once because we figure we lose sales for 18 months after a dealership closes until other dealers pick up the business.”

The automaker is considering the sale of its Hummer and Saab brands, weighing options for Saturn and shrinking Pontiac to as little as one model as part of the plan to meet terms of the government loans. GM has about 400 dealerships for Saturn and 100 each for Saab and Hummer, LaNeve said.

Voluntary vs. Involuntary Closures

The above article gives one the impression GM is actively managing and is in control of dealership closings. If GM sells Hummer, and Saab that is 200 dealerships right there. And what happens when it shrinks the Pontiac line? Why should there be any Saturn dealerships? GM should trash the entire line. Saturn has never made one penny ever? That is 600 dealerships right there, not counting a thing for Pontiac.

And what about involuntary closures? In September of 2008 The World's largest Chevy dealership enters bankruptcy filing.

Bill Heard Enterprises has filed for Chapter 11 bankruptcy protection, a casualty of an easy-credit economy that relied on a shaky consumer base to keep sales churning.

Bill Heard, which had four dealerships in metro Atlanta and one in Columbus and operated in seven states, grew into the world’s largest Chevrolet dealer with more than $2 billion in sales a year. Much of its recent growth was based on aggressively marketing autos to those with blemished credit.

The GMAC Picture

GM dealerships survived on making sales to poor credit risks. GM intends to go back at it now that the Fed has agreed to make GMAC a bank. And as long as the Fed is willing to supply the credit, foolish lending patterns can be reinstated, and marginal lenders will survive, but only for a while, with the Fed and/or Treasury left holding the bag as described in Fed Destined To Become World's Largest Auto Dealership.

Even still, the Fed's gambit with GMAC will not forestall the majority of dealer bankruptcies or consolidations. I think GM is going to lose 2,000 dealerships, not 500.

U.S. Dealership Closures

Inquiring minds are taking another look at this October 2008 report: U.S. dealership closures to increase into 2009

The number of U.S. car dealerships closing is expected to increase into 2009 with as many as 3,800 dealerships at risk of closure because of dwindling sales and tighter credit, according to a newly released study by Grant Thornton LLP on Wednesday.

With U.S. light vehicle sales predicted to drop to the 13.7-million-unit range in 2009, the study said that about 18 percent of the total number of U.S. car dealerships would need to close to maintain sales per dealer at last year's level of about 750 units.

"An increasing number of dealers are simply closing their doors because sales have plummeted, credit has dried up, the overall retail environment is increasingly challenging and potential investors are sitting on the sidelines," said Paul Melville, a partner with Grant Thornton LLP.

Car sales estimates have plunged since that study came out. GM's estimate as to the number of 2009 closures is as suspect as anything else it ever says or does. Ironically, the more closures GM makes, presuming it can get concessions from union workers over wages, layoffs, and workforce reductions, the better off it will be.

GM sees China auto sales slowdown in 2009

It is not just GM's US sales that are plummeting. Please note that GM sees China auto sales slowdown in 2009.

Industry-wide auto sales in China may decline as much as 10 percent in the first half of 2009 compared to a year ago before "robust growth" resumes, General Motors Corp's Asia Pacific head said on Monday.

But GM's Nick Reilly also told reporters at the Detroit Auto Show that industry auto sales in the world's second-largest market could rise slightly to 9.5 million units by the end of the entire year.

GM is always forecasting a second half recovery, here, there everywhere. I have a suggestion for GM: Fire all of your economists. I have a suggestion for everyone else. Double or triple GM's downside targets. History suggests it is the right thing to do.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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