RBC Capital Markets said Friday that the bankruptcies of General
Motors Corp. (GMGMQ) and Chrysler LLC will produce far fewer
car-dealership closings than expected as the dealers adjust by
selling other car brands.
The number will likely be closer to 2% of the new-car dealer
base than the 15% assumed by the investment community, said RBC
hardline retail analyst Scot Ciccarelli, citing an RBC survey.
The auto makers have said they need to shrink their dealer
networks to cut costs, improve the image of their brands and
ultimately boost sales. The plans were made under the guidance of
President Obama's auto task force.
The dealerships' looming demise has prompted lawmakers to step
up pressure on GM and Chrysler to pull back on the planned
closings, with some arguing that neither the White House nor the
companies themselves had offered any economic rationale for the
closing of the dealerships.
There were approximately 20,700 new car dealers in the U.S. at
the end of last year. GM and Chrysler have said they intend to
revoke the distribution licenses of some 2,400 and 789 dealerships,
respectively. That would shrink their dealer networks by 42% and
25%.
RBC's survey of 10% of the Chrysler dealers who had their
franchise revoked found that only 12% expected to fully close their
doors. Almost 50% already had other new-car franchises, so as they
stop selling Chrysler products they'll still have other brands to
offer. Another third expect to convert to used-car dealerships.
Ciccarelli said a decrease in the number of expected new-car
dealership closings is unfortunate news for used-car superstore
chain CarMax Inc. (KMX), other new-car purveyors and even
auto-parts retailers, who stand to benefit from the dealerships'
disappearance.
-By Mike Barris, Dow Jones Newswires; 201-938-5658;
mike.barris@dowjones.com