Wednesday, May 13, 2009

It's going to be rough week for car dealers

The unfortunate result of the current auto industry crisis is that dealer networks are going to shrink dramatically. While this is a healthy development for the future of the industry it's going to be a painful adjustment as many people lose their jobs and empty car lots start to dot the landscape.

According to bloomberg GM will notify 1,000 dealers of their franchise expiration on May 15th.

"General Motors Corp., working to shrink operations to match consumer demand, will notify 1,000 to 1,200 auto dealers on May 15 that they fail to meet franchise agreements.

GM will deliver letters to dealers whose stores fail to meet criteria such as sufficient working capital, sales or customer-satisfaction levels, explaining that GM will not renew their franchise agreements when they expire this year or in 2010, GM spokeswoman
Susan Garontakos said.

The largest U.S. automaker said last month it plans to shrink its dealer network to about 3,600 from the 6,200 outlets."

Also, it sounds like Chrysler is making a similar moves as early as tomorrow.

"Chrysler LLC plans to fire up to 800 of its 3,200 dealers on Thursday, a lawyer seeking to represent the dealers said on a conference call.
The lawyer, Stephen Lerner, who heads the bankruptcy and restructuring practice of the law firm Squire Sanders, told dealers on the Tuesday call that the automaker plans to reject at least 800 franchise agreements, according to a dealer who listened to the call."

The markets seem to be struggling a bit under the weight of bad data. Housing prices down, Chinese Industrial production below expectations, below expectation retail sales, and ANOTHER bottom call from Alan Greenspan on housing. Mr. Greenspan has been calling for a bottom in housing for about 3 years now. Eventually, he'll be right.


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