What are dealership consolidations really about?

“It’s not about the numbers,” Jim Farley, Ford Motor Co.’s global marketing and sales chief, told me at the National Automobile Dealers Association convention earlier this month.

I had asked him how many dealerships Ford eliminated last year. It was 129. Ford ended 2010 with 3,424 U.S. dealerships.

To Farley’s point: Ford’s dealership consolidation isn’t solely a numbers game. It’s also about having stores in the right locations and markets, then retaining customers.

But the common wisdom is that fewer dealerships in big markets equal more customer traffic at remaining stores. That supposedly equates to greater profits at surviving stores, which can be reinvested.

I’ve heard that idea for years. When I covered General Motors, I spoke to hundreds of dealers who lost their businesses as GM slashed its dealership ranks as part of its 2009 bankruptcy reorganization. GM and Chrysler eliminated more than 2,200 dealers.

It was personal to those dealers, but it was merely numbers for automakers who wanted to increase per-store customer traffic at remaining dealerships.

This year sales per dealer may rise to about 745 new vehicles, according to dealership consultant Urban Science. Urban Science says the number of U.S. auto dealerships fell 4.4 percent last year to 17,659.

"The domestic consolidations worked and have allowed the remaining dealers an opportunity see their numbers rebound faster," John Frith, vice president of Urban Science, said in a statement.

So apparently, in the end, it really is about the numbers. 

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