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As the U.S. economy lurches into recession, will banks start redlining Detroit 3 dealerships?

As you doubtless recall, mega-dealer Bill Heard's network of Chevy dealerships was forced into bankruptcy after GMAC withdrew floorplan financing for ten of his 14 stores.

Now that Heard's empire has crumbled, one might logically ask whether other dominoes will fall. Here is a partial -- and troubling -- answer.

In his Sept. 29 report to investors, Richard Kwas -- an analyst for Wachovia Capital Markets LLC -- reported that approximately 55 to 60 dealerships have closed since mid-summer.

The report did not indicate how many of those held GM, Ford or Chrysler franchises, although a majority apparently were Detroit 3 dealerships. In any event, more dealerships are expected to close.

"The worst stores are not expected to survive over the next 3-6 months," Kwas wrote. "That said, decent operators are feeling the pinch with a growing number likely deciding to exit the business over the next year."

I have no idea how many stores will close -- my crystal ball is cloudy -- but it's safe to say that Bill Heard's demise is only the first salvo in this rout.

Now, I won't lose much sleep over the troubles of Mr. Big Volume, who got into serious trouble with Georgia regulators over a bogus warranty recall notice to Chevy customers, among other shenanigans.

But if a guy who generates $2.5 billion in annual sales can't get floorplan financing from lenders, what are the odds for smaller dealerships?

In recent weeks, we've heard troubling reports of dealers who can't get financing. The captive lenders -- GMAC, Ford Credit and Chrysler Financial -- are struggling to raise enough capital to make car loans. So dealers are reaching out to independent lenders such as Chase, Bank of America, Capitol One and Wachovia.

But as the credit crisis deepens, the independent banks are starting to back out of leasing, sub-prime loans and anything else with a whiff of risk. Perhaps I'm just paranoid, but my fear is that the banks will start redlining Detroit 3 dealers.

Over the past year or so, GM, Ford and Chrysler have suffered a catastrophic loss of market share. If the Detroit 3 can't stabilize their sales in the next year or two, will independent banks question whether those dealerships are too risky to finance?

Here's my advice: Any dealer with a Detroit 3 franchise ought to call their congressman and demand passage of the $700 billion Wall Street rescue package. As currently written, the rescue package would allow the Treasury Department to purchase automotive loans from captive lenders and banks. That would help the lenders stay in business and make fresh loans.

Yes, the bailout offends my sensibilities. Like you, I could assemble a rogue's gallery of Wall Street CEOs that deserve to be stripped of their multi-million dollar bonuses.

But this is a really bad time to indulge one's populist instincts.

For many dealers, it's a question of survival. Call your congressman. If your credit dries up, this game is over.