February 9, 2008 in Business

U.S. auto dealers brace for ‘08

Tom Krisher Associated Press
 
Associated Press photo

Unsold 2007 Chrysler 300 sedans sit at a dealership in Centennial, Colo., on Sunday. Chrysler LLC plans to significantly reduce its product lineup and number of dealerships as the automaker rolls out a new corporate initiative. Associated Press
(Full-size photo)

DETROIT – When thousands of U.S. auto dealers gather in San Francisco this weekend, much of the talk will be about just getting through 2008.

The obstacles include a shaky economy, volatile stock market and tightening credit, setting up what economists are predicting could be the worst sales year in more than a decade.

With word Friday that Chrysler may have plans to thin its dealership ranks and the other two U.S.-based automakers looking to do the same, those left to sell another day may end up stronger – and car buyers may benefit as well.

“Fewer dealers means better prices for the customers,” said Gerald Meyers, a former chairman of American Motors Corp. who now teaches leadership at the University of Michigan.

That’s because dealers not making money aren’t quick to offer discounts.

“If they’re profitable, they won’t lose the sale,” Meyers said. “If they’re not profitable, they might lose the sale on the margin.”

Automakers this year also could again offer zero percent loans through their finance arms and other incentives to help spur sales. But 2008 may be toughest for dealers who sell cars and trucks made by the Detroit Three, all of which saw sales declines last year and all of which are in the midst of restructuring.

“It’s going to be an interesting year,” said Paul Gaudet Sr., owner of a six-dealer group in Tilton, N.H.

About 10,000 dealers and their spouses will attend this year’s four-day National Automobile Dealers Association convention starting this weekend, and many of the programs will help them cope with 2008. This comes as the Detroit Three want to cut dealer ranks to better match their market share, which has shrunk in recent years as competitors like Japan’s Toyota Motor Corp. made gains.

“Myself and everybody else realizes we’re not going to sell as many new cars, but the used car business should be fairly strong,” Gaudet said.

Chrysler has told dealers that it could reduce the number of dealerships selling its cars by as much as a third, according to Alan Helfman, vice president of River Oaks Chrysler Jeep in Houston. Chrysler LLC said in a statement that it plans to align Chrysler, Jeep and Dodge product offerings under one roof. It says no final decisions have been made.

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