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GM, Ford Profits Show Dealer Networks Now Healthier, Consulting Firm Says
U.S. car-dealership closures are easing, with 258 stores lost in the first half, and U.S. automakers have a “good number” of dealers as sales climb, retail consulting firm Urban Science said.
Dealer closings slowed from more than 1,600 last year, and there were 18,223 dealerships nationwide as of July 1, Urban Science said today at a media briefing in Detroit. General Motors Co. and Ford Motor Co.’s second-quarter profits prove that their networks are a good size, and that dealers are more profitable even as sales remain sluggish, the firm said.
Even if sales return to decade-ago levels, the companies probably won’t expand their networks as they did in the past, when the number of dealerships ballooned and dealers competed for sales against same-brand stores a few miles away, said Randy Berlin, global practice director at Detroit-based Urban Science.
“Let’s hope the sins of the past aren’t repeated in the future,” Berlin said.
U.S. deliveries reached an annualized rate of 11.5 million in July, compared with the average 16.8 million vehicles a year from 2000 to 2007. Sales last year fell to 10.4 million, the lowest since 1982.
GM, the biggest U.S. automaker, will have 4,500 dealers by the end of the year, more than the 3,600 the Detroit-based automaker said during its 2009 bankruptcy that it planned to keep, said John Frith, Urban Science’s vice president of retail- channel solutions.
Second-Quarter Profit
GM, which said today second-quarter profit was $1.54 billion, had about 6,250 stores before cutting its network during its bankruptcy.
Chrysler Group LLC will end the year with about 2,400 dealers, Frith said. The Auburn Hills, Michigan-based company had about 3,200 dealers before its bankruptcy, double the number of stores in the network of Toyota Motor Corp., the world’s largest automaker. Chrysler hasn’t outsold Toyota in the U.S. since 2005, according to Woodcliff Lake, New Jersey-based Autodata Corp.
Chrysler pared its losses to $172 million in the second quarter.
Some shuttered GM and Chrysler dealers filed for arbitration and won. Those stores have challenges ahead, said Katherine Kress, Urban Science’s vice president of consumer- marketing solutions.
‘Prove Themselves Quickly’
“They have to prove themselves quickly, because some of their customers may have already been redirected to other dealerships,” she said.
There is less room for poor performers now, Berlin said.
Ford, the only U.S. automaker to avoid bankruptcy, posted a second-quarter profit of $2.6 billion. The Dearborn, Michigan- based company has also lost stores, including 64 this year, and it may lose more when it sheds its Mercury brand later this year, Frith said.
“It’s going to be very difficult for Ford to maintain those Lincoln-Mercury dealers as Lincoln only,” he said. Ford has 270 stand-alone Lincoln-Mercury stores, and it may allow some of them to sell its namesake brand, Frith said.
The automaker needs to offer incentives to Mercury drivers “to make sure they buy Ford or Lincoln,” said Kress, the Urban Science consumer-marketing executive.
To contact the reporter on this story: Theo Keith in Detroit at tkeith6@bloomberg.net.
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