After steep slide, franchise and store numbers stabilize
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After years of hemorrhaging, the number of new-vehicle outlets and franchises stabilized last year.
Additions and eliminations were fairly steady, even as vehicle sales rose. The return to normalcy came after several years in which the number of dealerships and franchises tumbled because of recession, bankruptcy restructuring and brand eliminations.
Last year the number of light-vehicle franchises in the United States remained virtually flat, falling 78, or less than 1 percent from a year ago, to 29,231 as of Jan. 1. The number of dealerships that house those franchises edged up 1 percent to 17,859, according to the annual census compiled by Automotive News using data provided by automakers and some estimates.
That is strikingly different from the turmoil of 2010, when the number of franchises dropped 16 percent to 29,309 and the number of dealerships dropped 5 percent to 17,653 as of Jan. 1, 2011.
A franchise is an agreement that gives a dealer the right to sell a particular brand of new vehicles. A dealership is the building in which one or more of those vehicle brands are sold.
Given the steep drop in franchises over the last few years and the uptick in new-vehicle sales, the leveling off of franchise comings and goings is to be expected, says John Frith, vice president of Urban Science, a global retail consulting firm that studies automotive franchise activity.
"The market constantly changes, so there's always a little bit of shifting going on, adding a dealer here or shifting a dealer or something like that," Frith says. "It's hard to say that [the size of the dealership network] was ever perfect. It certainly isn't perfect now, but the market causes the adjustments to happen."
The market, not bankruptcy or other shocks. With the recession and the 2009 bankruptcies of General Motors and Chrysler, those two automakers canceled the franchise agreements of thousands of dealers. Thinning the herd further was the elimination of the Mercury, Saturn, Pontiac and Hummer brands.
Over the years, most of the franchise losses were at the expense of the Detroit 3. As they lost market share to import brands, General Motors, Ford Motor Co. and Chrysler Group had too many dealerships and in too many wrong places.
On Jan. 1, 2012, the Detroit 3 collectively had 18,507 franchises, 237 fewer than a year earlier. Together they have chopped 8,970, or a third of their franchises, since Jan. 1, 2009.
GM and Ford trimmed both dealerships and franchises last year, but Ford cut deeper in percentage terms. Ford's franchise count fell 4 percent, with a 13 percent drop in Lincoln franchises, and its dealership tally slid 3 percent. GM had drops of 3 percent in franchises and 1 percent in dealerships.
Chrysler Group, in contrast, added both franchises and dealerships last year. That is partly the result of its Genesis consolidation plan, which called for combining its four brands -- Chrysler, Dodge, Jeep and Ram -- in each store by the end of 2011.
Chrysler Group's franchise count stood at 6,625 on Jan. 1, 2012. That's a 2 percent increase over 2010 but a drop of 15 percent from its count of 7,819 on Jan. 1, 2009. Its dealership count stood at 2,336 on Jan. 1, 2012, up 25 from a year earlier.
Chrysler Group's franchise increase did not include its Italian brand, Fiat, which joined the U.S. auto retail landscape in 2011 and had 138 franchises on Jan. 1.
Suzuki shed 32 franchises last year, making it the biggest loser among Japan-badged franchises -- again. Suzuki's franchise count has been dropping for several years, falling to 246 on Jan. 1 from 400 on Jan. 1, 2009.
You can reach Arlena Sawyers at asawyers@crain.com.
