By Nick Carey
WARREN, Mich., Jan 9 (Reuters) - For John Dauod, the day they pulled down the blue-oval logo sign at his Ford dealership marked a deep and personal loss.
'It was like we'd had a death in the family,' said Daoud, 41, a Ford dealer in the Detroit suburb of Warren, who decided to close a franchise that had sustained his family for three generations.
Sales in throughout the auto industry were pummeled throughout 2008 by a slowing U.S. economy and a deepening credit crunch, which cut off loans to many would-be car buyers. U.S. auto sales dropped 18 percent for the year, but Detroit's Big Three were hit particularly hard.
Daoud's grandfather, Al Long, founded the dealership in 1945 at a time when U.S. automakers dominated the industry.
'I was raised my whole life to run a Ford dealership, so this was one of the hardest decisions I've ever had to make,' Daoud said.
But with U.S. auto sales in a tailspin in 2008, Daoud decided to close his family's dealership for the No. 2 U.S. automaker Ford Motor Co.
Auto sales at Ford fell 20 percent in 2008; while No. 1 U.S. automaker General Motors Corp saw its sales drop 22 percent. No. 3 U.S. automaker Chrysler LLC -- controlled by private equity firm Cerberus Capital Management LP -- plunged 30 percent in 2008.
The situation has become so dire for Detroit's automakers that both GM and Chrysler have had to rely on $17.4 billion in U.S. government loans to survive.
That has left U.S. auto dealers, which are independent businesses, facing a tough choice: try to hold on in a deteriorating market, or close.
Daoud chose to switch to selling used cars, which usually carry a higher profit margin than new ones, at his Long Family Auto Center.
'With all that's happening in the auto industry we needed to prepare ourselves for whatever comes down the line,' Daoud said. 'We felt that we had to diversify in case any of the Big Three is permanently disrupted.'
'It is fun? Are we happy? Do we like doing this? No,' he added. 'But it's what we've got to do.'
EVER DECREASING CIRCLES
The Big Three have seen their market share erode over the decades, but still have far more dealerships than their Asian and European competitors.
According to Automotive News, the Big Three had 14,199 dealerships in the United States at the start of 2008, while their foreign counterparts had 7,262 dealers.
Despite having almost twice as many dealerships as their foreign rivals, the Big Three's market share slipped to 49 percent in 2008, down from 52 percent a year earlier.
Faced with falling sales, the Big Three are working to reduce the number of dealers even as they cut production.
Kurt Brinkman, the regional manager for the Ford, Lincoln and Mercury brands in Michigan and parts of northern Indiana and Ohio -- an area that has some 275 dealers -- said up to 15 dealerships in his territory have closed in the past year. Four were in the Detroit area.
'We're actively trying to consolidate our dealer network to match our production capacity,' Brinkman said. 'When dealerships make the difficult decision to exit the market, we try to help them exit gracefully.'
Ford buys back cars from closing dealerships, he said.
'Although it was a tough decision for Al Long Ford to make the switch, they have helped the other Ford dealers in the area,' Brinkman added.
The number of U.S. auto dealers declined by 700 in 2008, the National Automobile Dealers Association said. Almost 90 percent of those represented the troubled U.S. automakers. NADA expects dealership numbers to drop by another 900 this year.
'Recessions close dealerships,' NADA economist Paul Taylor said. 'But that's better than the automakers having to choose which ones go and which don't.'
As profit margins decline, 'family-owned dealerships will most likely need to get out or acquire other dealers,' Fifth Third Bank analyst Mirko Mikelic said.
'In the long run it will be better for those who make it,' he added. 'It's almost like Darwin's theory of evolution. The strongest will survive.'
As for Daoud, he still has one Ford dealership in Clinton, Michigan.
'I am still a proud member of the Ford family,' he said.
(Reporting by Nick Carey, editing by Leslie Gevirtz) Keywords: AUTOS/DEALERS (kevin.krolicki@thomsonreuters.com; + 1 313 967 1902; Reuters Messaging: kevin.krolicki@reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
WARREN, Mich., Jan 9 (Reuters) - For John Dauod, the day they pulled down the blue-oval logo sign at his Ford dealership marked a deep and personal loss.
'It was like we'd had a death in the family,' said Daoud, 41, a Ford dealer in the Detroit suburb of Warren, who decided to close a franchise that had sustained his family for three generations.
Sales in throughout the auto industry were pummeled throughout 2008 by a slowing U.S. economy and a deepening credit crunch, which cut off loans to many would-be car buyers. U.S. auto sales dropped 18 percent for the year, but Detroit's Big Three were hit particularly hard.
Daoud's grandfather, Al Long, founded the dealership in 1945 at a time when U.S. automakers dominated the industry.
'I was raised my whole life to run a Ford dealership, so this was one of the hardest decisions I've ever had to make,' Daoud said.
But with U.S. auto sales in a tailspin in 2008, Daoud decided to close his family's dealership for the No. 2 U.S. automaker Ford Motor Co.
Auto sales at Ford fell 20 percent in 2008; while No. 1 U.S. automaker General Motors Corp saw its sales drop 22 percent. No. 3 U.S. automaker Chrysler LLC -- controlled by private equity firm Cerberus Capital Management LP -- plunged 30 percent in 2008.
The situation has become so dire for Detroit's automakers that both GM and Chrysler have had to rely on $17.4 billion in U.S. government loans to survive.
That has left U.S. auto dealers, which are independent businesses, facing a tough choice: try to hold on in a deteriorating market, or close.
Daoud chose to switch to selling used cars, which usually carry a higher profit margin than new ones, at his Long Family Auto Center.
'With all that's happening in the auto industry we needed to prepare ourselves for whatever comes down the line,' Daoud said. 'We felt that we had to diversify in case any of the Big Three is permanently disrupted.'
'It is fun? Are we happy? Do we like doing this? No,' he added. 'But it's what we've got to do.'
EVER DECREASING CIRCLES
The Big Three have seen their market share erode over the decades, but still have far more dealerships than their Asian and European competitors.
According to Automotive News, the Big Three had 14,199 dealerships in the United States at the start of 2008, while their foreign counterparts had 7,262 dealers.
Despite having almost twice as many dealerships as their foreign rivals, the Big Three's market share slipped to 49 percent in 2008, down from 52 percent a year earlier.
Faced with falling sales, the Big Three are working to reduce the number of dealers even as they cut production.
Kurt Brinkman, the regional manager for the Ford, Lincoln and Mercury brands in Michigan and parts of northern Indiana and Ohio -- an area that has some 275 dealers -- said up to 15 dealerships in his territory have closed in the past year. Four were in the Detroit area.
'We're actively trying to consolidate our dealer network to match our production capacity,' Brinkman said. 'When dealerships make the difficult decision to exit the market, we try to help them exit gracefully.'
Ford buys back cars from closing dealerships, he said.
'Although it was a tough decision for Al Long Ford to make the switch, they have helped the other Ford dealers in the area,' Brinkman added.
The number of U.S. auto dealers declined by 700 in 2008, the National Automobile Dealers Association said. Almost 90 percent of those represented the troubled U.S. automakers. NADA expects dealership numbers to drop by another 900 this year.
'Recessions close dealerships,' NADA economist Paul Taylor said. 'But that's better than the automakers having to choose which ones go and which don't.'
As profit margins decline, 'family-owned dealerships will most likely need to get out or acquire other dealers,' Fifth Third Bank analyst Mirko Mikelic said.
'In the long run it will be better for those who make it,' he added. 'It's almost like Darwin's theory of evolution. The strongest will survive.'
As for Daoud, he still has one Ford dealership in Clinton, Michigan.
'I am still a proud member of the Ford family,' he said.
(Reporting by Nick Carey, editing by Leslie Gevirtz) Keywords: AUTOS/DEALERS (kevin.krolicki@thomsonreuters.com; + 1 313 967 1902; Reuters Messaging: kevin.krolicki@reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.