Wall Street could speed Detroit 3 consolidation
Centerbridge's Girsky: "We need to reduce the number of Big 3 dealerships by 60 to 70 percent."
What's more, the investor might want to put his money into helping make that happen.
"If we could take five dealers in an urban area and chop it to three, does that make throughput go up?" said Stephen Girsky, president of Centerbridge Industrial Partners LLC.
"That's simple math -- doesn't it make sense?"
Centerbridge, formed last year, controls $3.2 billion and specializes in automotive investments. Girsky spoke here yesterday at the J.D. Power Automotive Roundtable.
"All things being equal," Girsky said, "we need to reduce the number of Big 3 dealerships by 60 to 70 percent to give them the throughput of a Japanese make. Honda and Toyota (dealerships) are selling two to three times what the average (Detroit 3) dealer is selling."
The average U.S. Honda Division dealership sold 1,238 cars and trucks in 2005, while the average Ford division dealership sold 696 vehicles. Figures are not available for 2006.
The Detroit 3 are acutely aware that they have more dealers than they need, especially in some older urban markets. Each of the U.S. companies has proposed cutting its retail network.
But Girsky said the Detroit 3's current rate of dealership reduction -- 4 to 5 percent a year -- will take too long to make their brands competitive in per-store sales.
After his presentation, Girsky said his company would consider investing in retail operations but has not discussed any deals.
"Buying one or two dealers -- that's too small for us," he said. "You need critical mass."
Girsky said factors that would influence any decision to invest include dealership real estate. He added : "Some of these dealers are sitting on real estate where the best use might not be a dealership anymore."
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