Chrysler Is Looking To Get Smaller In More Ways Than One

Implications: Along with plans to team up with Nissan to build a new small car for North America, Chrysler is renewing its plans to cut the number of dealerships it has to match the company's declining sales. 

Analysis: The U.S. auto industry, struggling with a year in which vehicle sales could be the worst since 1995, is faced not only with the wrong model mix as consumers switch from gas-guzzling big pickups and SUVs, but also a glut of dealerships.

On Jan. 1, 2008, GM, Ford and Chrysler had 14,199 dealerships in the U.S. 621 fewer than the start of 2007.

The attrition of dealerships has accelerated each year since 2003, when the Detroit Three subtracted 256 stores. In 1980 the Detroit 3 had about 21,000 U.S. dealerships.

In recent years GM, Ford and Chrysler have tried to persuade many dealers to close or consolidate their stores in an effort to bring sales and profits in line with today's consumer demands.

But the Detroit 3 still have nearly two-thirds of new-vehicle dealerships, although they account for less than one-half of the new-vehicle market.

GM shed 248 dealerships and 227 franchises last year. But it still has 6,653 dealerships and 13,650 franchises in the U.S.- the most of any automaker.

GM seeks to combine Buick, Pontiac and GMC franchises under one roof and to develop luxury car dealerships that sell Cadillac, Hummer and Saab vehicles. Chevrolet would continue as stand-alone stores.

Ford had 4,056 dealerships on Jan. 1, 2008, a reduction of 214 from a year ago. Many analysts feel the Mercury brand days are numbered.

Chrysler subtracted 164 dealerships in 2007, leaving a total of 3,585 stores. Plans are to combine the Dodge, Jeep and Chrysler dealerships.

To give you some idea of the problems facing the domestic automakers, here are comparative numbers of sales per franchise for the Japan 3, versus the Detroit 3, for 2007.

Toyota: 1,628, sales per franchise, Honda: 1,165, Nissan: 746, Ford: 236, General Motors: 202, Chrysler: 169.