Urban Science Announces Record Number of U.S. Dealership Closures

Dealer Networks Undergo Unprecedented Change in 2009, Increased Partnerships with OEMs and Dealers Needed

DETROIT, Dec. 16 -- Global automotive retail consulting firm Urban Science has announced that 1,467 U.S. dealerships closed from January 1 to November 1, leaving 18,617 stores remaining. The closures represent the worst on record and reflect a 7.3 percent loss in the nation's dealer count. Normal attrition is 1 percent. The numbers are mostly a result of automakers taking proactive action to reduce dealer count, with General Motors and Chrysler driving approximately 90 percent of the consolidation.

"While OEM bankruptcies and bad economic times drove the closures, all dealers have to deal with a market that has dropped from several years of 17 million in sales to somewhere around 11 million," said John Frith, vice president of retail channel solutions, Urban Science. "Automakers and dealers have to do more with less - reach a greater territory with fewer resources. It's more critical than ever for automakers and dealers to work together for mutual, profitable growth. With change comes an opportunity to build a stronger network of optimal size and makeup."

Frith warns, however, that consolidation alone will not increase throughput at surviving stores. Closing a dealership in a market does not mean a customer will stay with a brand or travel to the next closest location. There is a mixture of factors to consider for consolidation to be successful, including convenience, competition, brand strength and market demand.

"Dealer networks are not static and all automakers must consistently tweak and optimize them as market conditions and customer preferences change," said Randy Berlin, global practice director, Urban Science.

Dealers unaffected by consolidation faced challenges caused by the recession and credit crisis. However, as long as dealers maintained required financing, they survived by cutting expenses and concentrating on used vehicles and parts and service--traditionally the most profitable areas of a dealership. With consumers holding onto their vehicles longer, dealerships were able to gain profits from an increase in non-warranty service work.

"Dealers are resilient entrepreneurs who survived this year just as they've survived tough times in the past," said Berlin. "They reduce variable costs and focus on parts, service and used cars for revenue."

"From an automaker's perspective, success means selling more vehicles and having profitable marketshare," said Katherine Kress, vice president of customer marketing solutions, Urban Science. "All automakers want to increase marketshare, but it's mathematically impossible for everyone to do so. Those that win a greater piece of the pie will leverage information about their customers to focus marketing resources on customers most likely to respond. We've been seeing more automakers form a partnership with their dealers, sharing data that will help them keep existing customers and conquest new ones."

Founded in 1977, Urban Science is a global retail consulting firm that takes a scientific approach to help companies identify where they should allocate resources in order to increase their market share and profitability in the most effective and efficient manner. With headquarters in Detroit, Urban Science serves its global clientele from offices in the United States, Spain, United Kingdom, Germany, Italy, France, Australia, China, Mexico and Japan. www.urbanscience.com.

Editor's Note: Urban Science maintains a list of current new-vehicle dealership and franchise information for all car and light-truck brands in the United States. Each month, it completes its Franchise Activity Report that details openings and closings. The data is the most reliable source of dealership statistics available, tracked monthly through the Urban Science Automotive Dealer Census. The full 2009 report will be available in February.