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Old 10-29-2008, 06:37 AM   #1
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Time to buy that Porsche dealership?

With credit drying up and new-vehicle sales slumping to a 25-year low, car dealerships from New Jersey to California are going out of business at an accelerating pace, threatening greater economic pain for communities around the country.

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Associated Press
Weeds grow along an empty car lot at a Chevrolet dealership in Clarks Summit, Pa., that closed in August.
The National Automobile Dealers Association estimates 700 new-car dealerships will close this year, up from 430 last year, and taking with them an estimated 37,100 jobs. That is a heavy blow to a key piece of the U.S. economy. The country's 20,700 dealerships accounted for $693 billion in sales last year, or 18% of all retail sales, according to NADA. Dealership wages and salaries make up 13% of the nation's retail payroll.

The rapid disappearance of dealers could also complicate the challenges facing General Motors Corp., Chrysler LLC and Ford Motor Co. After years of market-share losses, each has been left with more dealers than they need, and have been pushing dealers to consolidate. But a sudden loss of some of the bigger players could make it harder for the Big Three to maintain sales. GM, for example, suffered a setback recently when Bill Heard Enterprises Inc., one of the largest sellers of Chevrolet-brand vehicles in the country, filed for bankruptcy-court protection and closed its chain of 14 stores.

"The most serious concern for dealerships at the moment is liquidity," said Paul Melville, a partner at consulting firm Grant Thornton LLP. "That's worse for the Detroit Three because of the high amount of lease sales." Auto dealers tied to Detroit have struggled amid falling sales and leases of Big Three vehicles. Tightened credit in the past few months has made it difficult for many to stay in business.

Joseph Pfeffer, owner of Bigelow Motors, a Chrysler and Jeep dealer in Belleville, N.J., closed shop Oct. 4 after his bank decided to exit automotive financing and cut him off from $5 million in inventory financing. He had been in business since 1942, getting his start selling DeSotos and Plymouths. "I always survived," said Mr. Pfeffer, 92 years old, "but nobody ever cut off my line of credit before."

Like many dealers selling Detroit's brands, Mr. Pfeffer found no buyers for his franchise. "Why would somebody want to get into this now?" he asked.

Mr. Pfeffer said he approached three banks about providing financing but none was interested. In September, he sold only seven vehicles, compared with 40 the previous month. When he closed, all 26 employees were terminated.

Similar scenes have been playing out around the country. According to NADA, 590 new-car dealerships this year closed through September.

The markets most vulnerable to dealer closings are California, which has the most dealers of any state, followed by Texas, Pennsylvania and New York, according to NADA. In Michigan and Texas, dealer sales accounted for 20% of total retail sales in the states last year, the highest percentage of any states.

GMAC LLC, which provides financing for most of the nation's General Motors dealers, recently notified dealers that it was revising terms of inventory credit and interest rates on revolving credit lines. Chrysler Financial took similar steps. Both raised dealership costs.

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Old 10-29-2008, 09:57 AM   #2
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Ouch. I wonder how the Porsche dealership here is doing. It's not like we're really a huge Porsche buying market. You don't even see a lot of Audis here.
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Old 10-29-2008, 04:36 PM   #3
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Porsche sales are way down too. I don't know if the 09's will give it the boost it needs but I have to wonder if we're going to loose one up this way. Maybe once the Boxster and Cayman S get the new transmission and DFI things will pick up.
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Old 10-29-2008, 07:47 PM   #4
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Geez, where has everyone's common sense gone?

First you've got banks making terrible loans to people who had no business buying huge houses and now the banks are shutting off credit to everyone? A dealer that's been in business over 65 yrs had to be doing something right and should be considered a good risk. How are dealers going to operate w/o credit? And it has a ripple effect with all the dealership employees who are suddenly unemployed. Are the banks trying to show us how important they are by bringing our economy to its knees? Are they mad because peed on their bad loan party?

Once again, where's everyone's common sense?
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Old 10-29-2008, 07:51 PM   #5
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I was reading this morning that Porsche sales are down like 42% or some other large number. It's mostly because people can't afford Porsche's anymore, can't get a loan, and if they can afford it they aren't buying because it makes them look snotty to go buy a new Porsche in the middle of a recession. But I am sure most P-Car dealer will survive, and if not who cares. It's just one less place to rip you off.

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