By on October 6, 2008

The National Automobile Dealership Association (NADA) predicts that some 700 of 21,461 U.S. car dealers are going tits up this year. And you know what? It’s still not enough carnage for domestic automakers, whose bloated dealer networks are a major millstone around their neck. (Ford, Chevrolet and Chrysler started the year with around 4k stores vs. Toyota’s 1220 dealers.) Soaring floorplan costs– the interest charged by banks to fund a dealer’s inventory– have Darwined what The Big 2.8 learned not to do when GM paid a heavy price for terminating Oldsmobile. Automotive News [sub] reports that GMAC Financial Services, Ford Credit and Chrysler Financial are the major culprits; they’ve all raised their interest rates by roughly half a percentage point in a market where inventory just kinda sits there. But here’s the real story: “Some lenders are refusing to floorplan unprofitable dealerships, to the point of recalling their loans… Bank of America supplied two of [LA chain owner Mike] Kahn’s dealerships with $60 million in floorplanning, capital loans and mortgages. Last winter, Kahn says, the bank did not want to renew the loans and raised his floorplan interest rate through the roof. ‘I never felt so betrayed… You sign this agreement and they raise your rate. Or you don’t sign and they put you out of business.'” And now, file this one under “be careful what you wish for: “Last week, key lawmakers said the Federal Reserve also has authority under ‘extraordinary circumstances’ to make special loans for dealers’ inventory costs.”

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One Comment on “NADA Predicts 700 U.S. Car Dealerships Calling it Quits in ’08...”

  • avatar

    I wonder if the lenders AND the consumers will be any more cautious with taking on more debt than they were last year.

    I figure not. Not if everybody expects the gov’t to bail them out if it all goes wrong.

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