With tightening credit markets and poor consumer confidence, the retail auto industry will forever be changed. In a market in which a perfect storm as some have described of recession aided influence, your local Chevy, Ford and Chrysler store will be hurt the hardest.
It is currently been reported that 1 in 5 car dealerships will be closing over the next 2 - 3 months, that is nearly 4,000 dealerships across the nation. A staggering number considering the number of employees those dealerships employ and the Real Estate involved with these closings.
It has long been known that sales per outlet for GM, Ford and Chrysler stores have performed way under same store sales as compared with import stores, especially Toyota and Honda. Industry consolidation has been put on the back burner because of product issues and cash flow for the manufacturer, so natural financial attrition has reared it's head and the stores in poor performing markets will soon be gone forever.
The financial bailout that is helping Wall Street will not help this situation and I believe most people want to keep people employed and this bailout does nothing for that. What this bailout does is keep the financiers in business while working class individuals will be on the unemployment line. This crisis is only the beginning of a slow down that has been in the making for quite some time, going back over 2 years. I want to say with clarity that the bailout will not loosen access to capitol to small business, the requirements will be fundamentally tougher as we move forward period. As a result of a continued decline in real estate values and low consumer spending for an extended period of time which will take a while to recover, I predict that a turnaround will take quite some time. We should start to see some stress reduced sometime in the third quarter of 2009 with the economy breaking loose in 2010. Primarily what will be the distress in the commercial real estate markets, which no one is talking about, since the emphasis on the current crisis is with residential markets, is the catalyst for the extended recession.
When you look at the amount of dealership real estate that will be on the market, some of the most one dimensional facilities in the market place in which there will not be another auto brand to take it's place, the real estate in those market places will be hurt considerably.
The silver lining will be that as always markets will return eventually and the consolidation that has been needed for the last several years will move forward, even if it is not voluntary.
Enjoy Today!
That Car Guy
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