---

Dealership Consolidation Predicted to Continue

24 January 2000

Dealership Consolidation Predicted to Continue; Polk Forecast Predicts up to 4,000 Fewer Dealerships by 2010

    ORLANDO, Fla., Jan. 24 -- Dealer consolidations are hot in
the automotive industry and, if the trend continues, by 2005 there will be
20,770 new-car dealerships -- and by 2010, only 18,673 new-car dealerships
will remain.  This means that in 10 years, there would be a 17 percent drop in
the number of automotive dealerships, according to a study released today by
The Polk Company.


         Forecasted Number of New-car Dealerships
     Year                         Number
     1999                         22,400
     2005                         20,770
     2010                         18,673
     Source:  Polk


    Recent reports from NADA show that dealer chains represent 40 percent of
all dealerships and the number of new-car dealerships has been steadily
declining.  In 1999, the number of new-car dealerships declined to 22,400, a
loss of 6,100 dealerships since 1979.  Coinciding with this overall decline in
dealerships, the number of larger dealerships has increased.  In 1979, 60
percent of new-car dealerships sold 150 or more vehicles, increasing to 73
percent in 1989.  That number rose again to 81 percent in 1999.


                        Historic Number of Dealerships

     Year    New-Car Dealerships    New-Car Dealerships Selling 150+ Vehicles
     1979         28,500                              17,000
     1989         25,000                              18,275
     1999         22,400                              18,144
     Source:  NADA


    "Manufacturers are interested in dealer consolidation, as evidenced by
recent program changes such as the Ford Auto Collections," said Bill Barrett,
Managing Director of dealer programs at Polk.  "Because consolidating
dealerships results in significant cost savings, it appears manufacturers will
continue to move toward having fewer dealer franchises."
    Another impact of consolidation is fewer dealerships to service automotive
consumers.  Polk survey data show that two out of every five new vehicle
buyers (38.2 percent) rated the importance of having a convenient dealership
location near their home highly in their choice of a new vehicle.
    At the same time, consumers place a high value on having a large selection
of vehicles.  As dealerships consolidate, the size of dealerships and what
they offer will continue to grow.  Polk survey data indicates that 45 percent
of consumers rated the importance of having a large selection at their new-
vehicle dealership as being of "critical importance" or as "very important."
Larger, consolidated dealers are capable of having greater selection
available, generally have more services to offer and are able to offer more
competitive pricing.
    "Consumers are attracted to large dealerships because they want the lowest
price, which makes it difficult for the smaller dealerships to compete," said
Karen Piurkowski, Polk's Director of Loyalty.  "They eventually have to lower
their prices, which obviously affects profits."
    Polk survey data indicates that 88 percent of consumers rate the
importance of the total purchase price highly when purchasing their new
vehicle (of "critical importance" or "very important").  This fact alone
provides the larger, consolidated dealerships with a competitive advantage.
NADA studies also show that larger dealers (those selling more than 300
vehicles) earned an average of $207 per vehicle, while smaller dealers (those
selling fewer than 300 vehicles) experienced a loss of $66 per vehicle.
Smaller dealerships' profits primarily come from used car sales and F&I
(Finance and Insurance) departments.
    "With the number of dealerships declining, lower profits, and competition
from consolidated dealers, the future is uncertain for many dealerships," said
Piurkowski.  "Whether this current trend means consolidation is inevitable for
many dealerships remains to be seen."
    Polk's Manufacturer Loyalty Excelerator(TM), the basis for these findings,
provides consumer behavior insight and was created to provide household
loyalty information to manufacturers at various levels.  Polk's Manufacturer
Loyalty Excelerator(TM) determines loyalty percentages for the entire
automotive industry, provides cross-industry comparisons of loyalty behavior
and examines loyalty at various levels, e.g., from the industry level down to
the vehicle-line level.  The study measures loyalty throughout an entire model
year to identify trends as they occur in the industry.
    Polk is a global company delivering multi-dimensional intelligence to the
auto industry to enhance the relationships consumers have with brands.
Through lifetime understanding of individuals, Polk helps clients maintain
current customers, win new ones and build their brand loyalty.  Based in
Southfield, Mich., Polk is a privately held firm currently operating in
Australia, Canada, China, France, Germany, Holland, Spain, the United Kingdom
and the United States.
    Visit the Polk Web site at http://www.polk.com