2008 was a difficult year for just about every industry, but few have paid a heavier price in this recession than the automakers.  The combination of a slowdown in consumer spending and freezing credit markets have caused auto sales to grind almost to a halt.  Over the past few months, we have watched the CEO’s from Ford, General Motors, and Chrysler show up on Capitol Hill to make their case for a bailout and we have seen them receive billions of dollars to survive the first quarter of 2009.

Overall in 2008, auto sales were 18% than a year earlier, with a total of 13.5 million cars sold in the US.  Analysts expect this year to be even worse, with an estimated 10 million cars expected to leave lots before 2010.  The bailout money that they have received should help them to once again offer attractive vehicle financing to spur sales, but most consumers are not feeling financially strong enough to purchase a new car right now.

On a local level, car dealerships have dealt with challenges in their industry that would have been hard to imagine a year ago.  In all, 881 car dealerships closed their doors for good during 2008, and 80% of those closures were among dealerships that were tied to the big three US automakers.  This means that almost 5% of the dealerships in the country went out of business last year.

Customers were few and far between for most of the year.  Early in the year, oil prices had the price of gasoline near record highs, leading to some small car sales but almost no movement at lots with trucks, vans, and SUV’s.  These cars are typically big sellers for US automakers, who didn’t have the breadth of fuel-efficient cars to compete with Japanese automakers.  As gas prices came down, credit conditions worsened, and dealerships found that they lost sales because they were unable to provide financing to buyers.

The big three automakers have encouraged dealerships to consolidate where they can.  This would allow the car distribution process to be more simple and streamlined and also would allow for higher profit margins because of less competition among dealerships in the same region.

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Tags: 2008, auto industry, Chrysler, Ford, GM

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