Crystal ball gazing: Fewer dealerships, multiple franchises
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There will be fewer dealerships. More dealers will hold several franchises. Fewer family-owned stores will pass from one generation to the next.
The count of domestic-brand dealerships will drop, while the number of stores that sell Asian brands will grow. That's especially true if cars built in China start to sell in large numbers in this country.
Big dealerships in metropolitan areas will survive the shakeout, predicts Mike Jackson, CEO of AutoNation Inc. So will rural dealerships, he says. But "in between" stores will disappear, Jackson warns.
Maryann Keller, an industry consultant and board member of Lithia Motors Inc., says the changing nature of dealership finances will push dealers to operate multiple franchises.
Count on unpredictability
"Selling cars is an unpredictable business," Keller says. "One of the things that allow dealerships to manage the inherent risks of the business is to sell a portfolio of brands. The trend toward individuals or companies owning multiple franchises will continue."
Agreeing with Keller is Joe Eberhardt, the Chrysler group's executive vice president of global sales, marketing and service. His company seeks to combine Chrysler, Dodge and Jeep franchises within single dealerships.
"The overall number of full-service dealerships for the industry as a whole probably will shrink in the future," Eberhardt says. "You'll see an increase in dealers who own multiple franchises or dealerships."
A smaller number of dealerships will increase the pressure on all stores to increase sales, says Tom Rudnai, president of Longo Toyota in El Monte, Calif. Longo, which sold roughly 24,000 new vehicles last year, calls itself the top volume dealership in the United States.
"I don't see a lot of little dealerships out there," Rudnai says. "They can't afford to sustain what the manufacturers are trying to do with growth. It's too capital intensive and too talent intensive. I think some manufacturers will add some dealers to sustain intelligent growth, but other manufacturers will probably see some downsizing."
Steve Lyons, a former vice president of North American marketing, sales and service for Ford Motor Co., left the automaker this year to become a Ford dealer. He says he expects dealers increasingly to seek to own more than one franchise.
The financial and technological burdens of running stores are becoming too big for smaller entrepreneurs to handle, Lyons says. "The days of people just having one (franchise) over the long term are less and less the norm," he says.
Lyons says he envisions combinations of Ford and Lincoln-Mercury franchises in single dealerships.
Family jewels
The number of family-owned dealerships also is likely to decline, says Sheldon Sandler, founder of the investment firm Bel Air Partners. Growing competition will change the fraternity of dealers, he says.
Paul Taylor, chief economist of the National Automobile Dealers Association, predicts that family-operated dealerships will exist. But families may have to join forces and co-own stores in larger dealership groups to stay successful, he says.
Like the Chrysler group, General Motors seeks to consolidate franchises in single dealerships. It has established sales channels combining the Buick, Pontiac and GMC brands and, less extensively, for the Cadillac, Hummer and Saab luxury brands.
Bill Powell, GM's vice president of North American industry-dealer affairs, says dealership operations are becoming much more sophisticated.
"We're right sized for where we need to be today," Powell says. "In the future, there probably will be fewer dealers. The number, I really can't predict."
Jeremy Anwyl, president of the online automotive site Edmunds.com, says pressure on retail finances over the next 50 years will make dealers and automakers "take cost out of the system in the franchise framework."
Lyons says that as the number of dealers declines, he does not expect factory-dealer relations to degrade.
"I don't think (the relationship) will be distrustful," the former Ford executive says. "There will be recognition on both sides that they need to work together better to make themselves successful."
Even dealers who have prepared for the future are likely to find it arriving sooner than they expect, Lyons says. "The things we think will happen in 15 years will probably happen in 10."
You may e-mail Gail Kachadourian at gkachadourian@crain.com
