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Storm's over; is that blue sky?

Profits are busting out all over.

Dealers. Suppliers. Automakers. Big profits. Healthy earnings. Some record-setting profits. All this in our shrunken little auto industry.

Of course, it's supposed to work this way in a recovery: big fall, big pain -- then big earnings.

But after all the fear, uncertainty and, um, let's call it twists we've seen the past two years, it's reassuring to see the expected actually happen.

Profits for suppliers and automakers? I'm relieved. Improving profits for dealers? I expected it, but I'm still impressed.

The manufacturers are large craft, ponderous and hard to turn. And their capital intensity makes them top-heavy in a storm.

Dealers are small craft. Agile and responsive. Batten down the hatches and they mostly bob like corks in rough seas.

So I'm not surprised that public dealer groups posted bigger second-quarter operating profits and NADA said average dealer profit has doubled.

But I am impressed anyhow. Because profits aren't easy these days.

Sure, payrolls are cut back to match an 11-million unit U.S. market. But dealers are still amortizing sales over buildings and real estate sized for a 16-million market.

And the other two legs of the dealer tripod also are squeezed. Fewer new-vehicle trade-ins means it's harder to stock used-car lots. There are auctions, but their supplies are thin too and everybody's looking there, too.

Lower new-vehicle volume means fewer leads for the service department, which is already targeted by independent and chain repair shops.

But one positive may be emerging for surviving dealers, especially those with domestic franchises.

Two years ago, Detroit 3 franchises were a drag. The book on them was unwanted products, outdated locations, lousy prospects. Nobody seemed to want to buy them. Sale values rested entirely on real estate value -- which was falling in most places. Paying a premium for a going business? Forget it.

Even before the auto industry's storm hit, "blue sky" disappeared for domestic-brand dealerships.

Hard to argue against that assessment -- especially in hindsight for Pontiac, Saturn, Hummer or Mercury stores.

But as the sun comes out this year, big dealer groups and others have a fresh appetite for domestic-brand stores. With better products and brighter prospects, domestic brands are rising. So is the value of their franchises.

For dealers who have weathered the storm, there's even a little blue sky on the horizon.

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