Dealers considering whether to plan their succession now should know this: Manufacturers are looking to consolidate the dealer body.
A study by Roland Berger Strategy Consultants says the U.S. dealer network is not sustainable, and 3,800 stores -- just over one in every five outlets -- could close by 2020 if ownership is not consolidated into fewer and larger dealership groups.
Roland Berger is advising automaker clients to take a more direct approach to shaping consolidation.
In essence, the consulting firm argues that consolidation will happen, and automakers can help it to be an orderly reduction in owners. Or they can leave the consolidation to survival of the fittest, with a greater chance that outlets will close, possibly in locations that the factories wanted to keep open.
Automakers can get stronger retail performance from fewer, better and bigger partners, the Roland Berger study argues. But dealers oppose any manufacturer-driven reduction in their ranks.
"The challenge for the manufacturers here is, how can you make those guys sell and understand it's better for them to sell," said Thomas Wendt, a Roland Berger partner. "This is really the big, big thing the manufacturers need to think about, and they need to get right."
At the end of 2012 there were 17,760 U.S. dealerships, down 1 percent from a year earlier, the Automotive News Data Center says. The count has been relatively stable the last few years after big drops in 2008, 2009 and 2010.
Roland Berger already is working with some automaker clients to put in place better performance management systems that can be used to keep a close watch on store metrics. A red-yellow-green rating system is one approach.
Manufacturers must then do a better job of helping dealerships improve, Wendt said. They also need to strengthen their systems for documenting shortfalls by dealerships and communicating that information to the dealers.
"You have regular talks about when a dealer is in a red zone, when are they in the yellow zone, are they fulfilling their targets or not," Wendt said. "So you have clear evidence if it, at the end, comes to court."
He estimates that the number of dealer partners -- not the number of stores -- could be reduced by up to 50 percent with such an approach. Dealers that improve their performance could become buyers, while the manufacturer could help find buyers for the others.