More Car Dealers Shut Down
Auto Sellers Turn Off Lights as Sales Slump, Credit Tightens
By KATE LINEBAUGH


With credit drying up and new-vehicle sales slumping to a 25-year low,
car dealerships from New Jersey to California are going out of business
at an accelerating pace, threatening greater economic pain for
communities around the country.

The National Automobile Dealers Association estimates 700 new-car
dealerships will close this year, up from 430 last year, and taking with
them an estimated 37,100 jobs. That is a heavy blow to a key piece of
the U.S. economy. The country's 20,700 dealerships accounted for $693
billion in sales last year, or 18% of all retail sales, according to
NADA. Dealership wages and salaries make up 13% of the nation's retail
payroll.

The rapid disappearance of dealers could also complicate the challenges
facing General Motors Corp., Chrysler LLC and Ford Motor Co. After years
of market-share losses, each has been left with more dealers than they
need, and have been pushing dealers to consolidate. But a sudden loss of
some of the bigger players could make it harder for the Big Three to
maintain sales. GM, for example, suffered a setback recently when Bill
Heard Enterprises Inc., one of the largest sellers of Chevrolet-brand
vehicles in the country, filed for bankruptcy-court protection and
closed its chain of 14 stores.
[Car dealers]

"The most serious concern for dealerships at the moment is liquidity,"
said Paul Melville, a partner at consulting firm Grant Thornton LLP.
"That's worse for the Detroit Three because of the high amount of lease
sales." Auto dealers tied to Detroit have struggled amid falling sales
and leases of Big Three vehicles. Tightened credit in the past few
months has made it difficult for many to stay in business.

Joseph Pfeffer, owner of Bigelow Motors, a Chrysler and Jeep dealer in
Belleville, N.J., closed shop Oct. 4 after his bank decided to exit
automotive financing and cut him off from $5 million in inventory
financing. He had been in business since 1942, getting his start selling
DeSotos and Plymouths. "I always survived," said Mr. Pfeffer, 92 years
old, "but nobody ever cut off my line of credit before."

Like many dealers selling Detroit's brands, Mr. Pfeffer found no buyers
for his franchise. "Why would somebody want to get into this now?" he asked.

Mr. Pfeffer said he approached three banks about providing financing but
none was interested. In September, he sold only seven vehicles, compared
with 40 the previous month. When he closed, all 26 employees were
terminated.

Similar scenes have been playing out around the country. According to
NADA, 590 new-car dealerships this year closed through September.

The markets most vulnerable to dealer closings are California, which has
the most dealers of any state, followed by Texas, Pennsylvania and New
York, according to NADA. In Michigan and Texas, dealer sales accounted
for 20% of total retail sales in the states last year, the highest
percentage of any states.

GMAC LLC, which provides financing for most of the nation's General
Motors dealers, recently notified dealers that it was revising terms of
inventory credit and interest rates on revolving credit lines. Chrysler
Financial took similar steps. Both raised dealership costs.

Write to Kate Linebaugh at

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