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Urban Science Reveals Mid-Year Look at Dealer Closures

August 12, 2010

DETROIT – Automotive retail consulting firm Urban Science today announced that between Jan. 1 to July 1, the United States lost 258 dealers, bringing the national dealer count to 18,223. The change is on top of last year’s record closures when 1,603 retailers shut down. According to the firm, the higher than normal rate resulting from bankruptcy closures and arbitrations will continue through the remainder of the year. Two outcomes of the shakeout include stricter enforcement of performance standards for remaining dealers and increased government involvement in how and why OEMs shutter dealerships.

“We’re not through it all yet; there will continue to be flux in the network for the remainder of 2010 as GM and Chrysler work through the aftermath of arbitration, Mercury closes down and foreign brands like Fiat and Mahindra plan to enter the U.S. market,” said John Frith, vice president of retail channel solutions, Urban Science. “However, the worst of the resizing is behind us. The goal now is to maximize the existing network and give dealers the competitive tools they need to succeed.”

Given this new dealer landscape, automakers will need to place more focus on raising and enforcing performance and measurement standards for dealers. According to Urban Science Global Practice Director Randy Berlin, automakers need to provide an optimal environment for dealer profitability and dealers must take advantage of the customer marketing opportunities available to them. Automakers will be faced with additional controls as well, with many states such as Maine, North Carolina, Ohio, Oregon, Utah, Wisconsin, Arkansas and Illinois already enacting statutes intended to increase post-termination payments or grant rights to terminated dealers.

“Although bankruptcy court litigation may determine the future of this legislation, the message is clear that it will be harder going forward to make the large scale cuts we saw during the past year,” said Berlin.

Remaining dealers and automakers alike will benefit from the improved brand representation they now have post-arbitration. Dealerships will be competing against other brands rather than their own as they did in the past.

“In the aftermath of arbitration, reinstated dealers will focus first on recapturing customers that may have been redirected to other dealerships,” said Katherine Kress, vice president of customer marketing solutions, Urban Science. “Increasing sales is more important than ever before for those dealers, and a proactive strategy to reach out to the customer base is critical.”

Kress added that OEMs should partner with dealers to develop a unified approach to how customers will be communicated with, determining the appropriate message from the OEM, reinstated dealer and the dealers to which those customers were previously redirected.

Founded in 1977, Urban Science is a global automotive retail consulting firm that combines science with marketing to give companies the competitive edge they need to increase their market share and profitability in the most effective and efficient manner. With headquarters in Detroit, Urban Science serves its global clientele from offices in the United States, Spain, United Kingdom, Germany, Italy, France, Australia, China, Mexico, Japan, India and Russia.