There is little doubt that, barring Congressional or judicial intervention, as many as 2,000 new-car dealerships could close or be forced to close this year, with many hundreds more on the chopping block for 2010. What this means for the fast lube industry is a topic of intense debate among operators and industry experts. "There's a lot of fat to trim from the Big Three dealer networks," said David Kunkel, manager of Marketing&Direct Sales for CITGO Petroleum Corp. and a 30-year veteran of the lubricants and fast lube industries, with stops at Gulf Oil, Jiffy Lube and other companies. Kunkel noted that 881 dealerships ceased operations in 2008, which represented 4.2 percent of the total in operation at the end of 2007. Chrysler recently announced that 789 of its dealers would close as part of its bankruptcy filing, roughly 25 percent of the approximately 3,200 dealerships in operation at the start of 2009. General Motors wants to close 1,675 of its dealerships this year and hundreds more in 2010. Even Ford, in much better financial shape than the bankrupt Chrysler or GM, has seen 700 of its dealerships close through attrition since 2005. . "And with 3,700 dealers remaining, you'll see Ford make more cuts in the future," Kunkel said. Audit firm Grant Thorton LLP estimated last year that 3,800 dealerships would need to close to maintain per-dealer sales at 2008 levels. The only problem with such a presumption is the auto industry may not see 2008 sales levels in the near future, meaning even more dealerships would need to close. Currently, the United States is on track to see less than 10 million new cars and light trucks sold this year, a number that would be a historic drop off. If automakers thought 2008 was bad when they moved 13.2 million vehicles (an 18 percent drop from 2007 sales of 16.1 million vehicles), 2009 could prove to be a killer — and maybe the start of a long-lived trend. "We're seeing a lot of trends affect the auto and service industries," Kunkel said. "Miles driven in 2009 are down even though gas prices are down compared with last year. We could be seeing a permanent correction in what consumers will use their cars for and the amount of travelling they will do by car." The problem hitting the car dealers the hardest — slumping new car sales — is only accentuated by the fact that people are keeping their cars longer. A variety of studies indicate that the average age of the American vehicle fleet is at a record number of years. If that is so, if American consumers do decide to keep their cars longer and the auto industry struggles to maintain annual sales of 10 million units for several years, the long-term prognosis for many dealerships would be bleak indeed. And if thousands more dealerships close on top of the thousands already closed or slated to close, how would that impact the fast lube industry? "It could be perhaps the most dramatic change in consumer automotive service behavior in the history of the automotive industry," Kunkel said, as potentially millions of consumers look for new automotive service providers. But dealerships slated for closure are not likely to simply close up shop. According to a new study, many of the nearly 2,000 new-car dealerships being shut down by GM and Chrysler may try their hand in the independent service market.ByGarrett McKinnonNOLN Staff Writer
...read more